After 125 years, MGEX remains focused on the future

Mark Bagan was named CEO of the Minneapolis Grain Exchange effective July 1 this year. He recently responded to a list of questions about the future of the exchange posed by Prairie Grains.

Q: What is your vision for the future of the Exchange?
A: Since the Minneapolis Grain Exchange’s Articles of Incorporation were written more than a century ago, our single-minded focus has been to listen to our constituents and build a marketplace that meets their risk management and price discovery needs. A large part of our current effort is focused on ensuring initiatives that are just under way become successful ventures. These include electronic trading and a suite of new agricultural index products. However, we remain equally focused on enhancing our traditional open outcry method of trading. On October 7, 2006, we will celebrate our 125^th anniversary. This type of longevity only comes from following a clear vision for the future and building on the successes of the past.

Q: What is the future of open outcry vs. electronic trading?
A: We are open minded as far as the method of trading. Open outcry trading has long proven successful for our constituents. However, MGEX also has taken an aggressive strategy toward electronic trading over the past five years. We have spent significant capital developing a viable electronic marketplace, and many other exchanges have done likewise based on their constituents’ demand for more efficiency from their open outcry markets. In particular, customers have frequently questioned the lack of timeliness of order confirmations, and as a result, they have desired the punctuality of electronic trading. MGEX has not had such complaints, however, and our open outcry environment is often complimented as the most efficient market to receive order confirmations. Nonetheless, we have developed a strategic initiative that supports our traditional open outcry environment along with providing overnight trading electronically for all our products.

Q: How can farmers utilize MGEX to enhance the profitability of their operations?
A: MGEX was founded in response to the need for price discovery, market integrity and risk transfer. These core principals continue to underpin our customers’ decisions to transact over $100 million in commerce daily at MGEX. Producers have opportunities to hedge six different crops at MGEX through both our physically delivered contract and our five agricultural index contracts. MGEX offers futures and options contracts on these six contracts, which provide risk management opportunities for any producer.

Q: Are there any new products on the horizon?
A: We have no immediate intentions to launch new products, and instead our focus will be to develop our current products. Our Hard Red Spring Wheat (HRSW) contract has been trading for more than a century and remains the centerpiece of our product offerings. HRSW futures and options trade by open outcry each business day and are offered each evening electronically on the e-cbot® powered by LIFFE CONNECT® platform. Additionally, MGEX has developed a suite of financially settled agricultural index products, which include National Corn Index, National Soybean Index, Hard Red Winter Wheat Index, Soft Red Winter Wheat Index and Hard Red Spring Wheat Index futures and options. These products trade in the evening and continue through the following afternoon five days a week. MGEX strongly believes in the value these products bring to the marketplace and intends to support these contracts while pursuing new opportunities for our constituents.

Q: Will the exchange focus on agriculture going forward or will it attempt to go into other areas?
A: Our past has been rooted in agriculture, and this will continue to be the case. From time to time, MGEX has delved into less traditional areas such as aquaculture and electricity. However, in the near term, our goal is to focus on building upon our rich history within the agricultural markets.