Commodity Exchanges: Consolidation Drivers and Implications

by Anshuman Jaswal, PhD, February 23, 2009
Industry Trends
Global, Asia-Pacific, EMEA, Latin America, North America

Abstract

Bangalore, India February 24, 2009

Commodity derivatives have been a growth market in the financial world. The pace of consolidation has quickened among trading platforms such as exchanges and interdealer brokers in the last two years. Along with the increasing importance of clearinghouses due to counterparty risk, drivers of consolidation such as geographical expansion, liquidity acquisition, and technology are expected to play a role in exchange development.

In this report, Commodity Exchanges: Consolidation Drivers and Implications, Celent analyzes the development of the leading global commodity exchanges. A wave of consolidation created larger entities such as the CME Group and ICE in the West. It is expected that exchanges such as CME Group, which deals in all segments of the commodity markets, will fare better than exchanges that deal in a single segment such as agriculture or metals.

The Western exchanges lead a global comparison on the basis of greater breadth of products and better technology. While the Asian exchanges are more basic, exchanges such as DCE and MCX have much higher growth rates because they serve the fast-growing economies of China and India (e.g., DCE grew almost 70% in 2008).

"Commodity exchanges will see major changes as they cope with the aftermath of the economic downturn. Volumes will suffer initially, but they are expected to benefit from the OTC business moving to exchanges, due to lower counterparty risk," says Anshuman Jaswal, Celent analyst and author of the report.

This is the first in a series of three reports that look at the trading platforms and clearing houses in the commodity markets. This report informs the reader about the major global commodity exchanges and analyses the reasons for industry consolidation that has taken place in the last few years. The increasing overlap between exchanges and the interdealer broker market is also discussed. The latter will be studied in greater detail in the second report in the series, with the final report looking at the crucial role of  clearinghouses in the marketplace.

This 70-page report contains 35 figures and 10 tables. A table of contents is available online.

Members of Celent's Commodities research service can download the report electronically by clicking on the icon to the left.  Non-members should contact info@celent.com for more information.  

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

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Michele Pace
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Tel: +1 212 345 1366

Europe (London)
Chris Williams
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Asia (Tokyo)
Yumi Nagaoka
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Table of Contents

Bangalore, India 24 February 2009

 

Executive Summary 3
Introduction 6
Commodities Market Overview 8
  8
  9
  11
  12
Exchange-Based Trading Overview 17
  21
Leading Exchanges 28
  28
  31
  36
  38
  42
  45
  49
  52
  55
  57
  59
Regulatory Environment 63
  63
  64
  64
  65
  65
  65
Conclusion 67

 

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