In response to John Lothian’s column “A Bad Trade” on Thursday, which argued that the CME Group should not sell the iconic CBOT building in Chicago:
It is often said that futures trades are a zero-sum game, where for every winner there is a loser on the other side of a trade. Given the size and diversity of the markets, I always found this theoretically correct, but a bit overly simplistic. So too is the idea that because CME Group has reportedly found a buyer for the CBOT building’s north and south towers for $150 million to $180 million, the CME must be the loser in this transaction.
John thought the decision makers on this must have been “numbskulls” to sell such historically valuable property in a historically down market. But it’s time to look beyond Chicago.
Here’s the scoop: CME Group isn’t a real estate company. It smartly leased space in its headquarters on Wacker Drive in Chicago for decades now, giving the company the flexibility it needed to grow, expand and move. Its decision to sell is no different from any other company looking to maximize assets and execute a business strategy. Sears, Roebuck & Co. moved out of the Sears Tower long before it ever became the Willis Tower. Chicago’s Wrigley Company sold the iconic Wrigley building on Michigan Avenue last September, and is moving the last of its employees a few miles away to its headquarters built seven years ago.
As for the idea of staying close to its customers, they still have ownership of the CBOT building’s east tower. Beyond that, how many big customers are actually located in the Board of Trade building any longer? Many of the largest proprietary trading firms are spotted all over the world. And given the focus on speed and technology today, you’d be a numbskull not to position your firm accordingly.
The CME–CBOT merger created a global derivatives giant. CME has looked well beyond Chicago’s borders since buying up Nymex, cutting deals in Latin America, opening a European clearing house, expanding its Asian presence and opening a co-location center outside Chicago.
Location matters less and less as these markets have become more global. That won’t stop. Sell the building. There are bigger trades out there to transact.