With so much political controversy swirling around the New York Mercantile Exchange in recent days, it is somewhat surprising that no politician has yet made an issue out of the continuing consolidation in the market for commodities exchanges: in particular, about the impending acquisition of NYMEX by the CME Group.

After all, the charge that energy speculators are to blame for much of the recent price run-up in gasoline and/or crude oil has become part of the common coin of political debate in the U.S., sometimes indeed promoted under such monikers as, “trader realism.�

NYMEX is necessarily at the center of that controversy, and CME will find itself in the same position when, as is now expected, the two complete their nuptials.

So: why hasn’t anyone on the national scene made an issue out of the merger?

In part, it may just be the the issue has too many moving parts. When the CME and CBOT merged last year, some discussion of the general trend of consolidation of derivatives exchanges did take place. That discussion involved the vertical integration of exchanges and clearinghouses, the “barriers to entry” this may create, the fungibility of products, the relationship between equity exchanges and their derivatives counterparts, and much else.

Even when a matter is of great public interest, once discussion passes a certain threshold of complexity it gets re-allocated in the public mind to a small circle of deskbound wonks.

Or it might be a general recognition that globalization has come to the point where everything has to happen on a very large scale, and that the consolidation of exchanges is an inevitability.

“Consolidation among exchange operators continues to be a viable growth strategy. The transaction will result in a more competitive exchange, offers NYMEX Holdings shareholders a financially fair consideration and is expected to be accretive to earnings for the surviving shareholders of CME Group,” is how Glass Lewis put the key point, in recommending that both sets of shareholders vote in favor of the deal at their upcoming meetings.

Still, I have the uneasy feeling that exchange consolidation could easily be portrayed, by a politician looking for a point to make, as a way of easing the least productive or rational or consumer-friendly forms of speculation out there. [I'm not making such a point, mind you, only commenting on what some hypothetical demagogue might be able to put together in this line].

My unsolicited (but inexpensive) counsel to any deal makers out there is, then, as follows: make these deals while the makin’ is good. The climate could change.

This entry was posted on Monday, August 4th, 2008 at 11:55 am and is filed under Commodities, Evil Speculators, Politics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.