Does it make more sense for the CBOT to get picked up by the CME or by the ICE? It should be looked at from a technology perspective and not just an immediate stock-price perspective. While there are some shareholder groups wanting the ICE deal for the CBOT because it offers more money in advance, the real synergy for growth is with the CME.

If the ICE buys the CBOT, shareholders better cash out quick because there is limited synergy with that merger. They will ride the accelerating downward vortex that hogs usually do in the world of bull and bear trading.

Technology Tsunami Awaits

On Aug. 4, 1998, my letter to the editor of the Wall Street Journal was published stating:

In response to your July 13, 1998 article on the possible merger between the Chicago Board of Trade and the Chicago Mercantile Exchange, it is not as easy as some make it out to be.

The merger of the communications-based information systems infrastructure should be thoroughly reviewed and not be taken as a small task in the shadow of a great merger.

This oversimplification of the impending technology issues is common among those who believe they have “all their bases covered” when it comes to managing and applying technology.

This includes some consulting firms that have no clue when it comes to really understanding the strategic application of technology to business.

Merging the two exchanges should be viewed from not only a political, organizational and economic standpoint but also from a technology standpoint.

At the time, both institutions had very disparate IT infrastructures that would not have mixed well. Not merging at that time was the right decision. Now, many things have changed, and there is common sharing of functions between the two institutions that would afford a synergistic organization.

In nine years, it is a shame that there are still many people who don’t understand the relevance of technology and network infrastructure. If you don’t have the right platform or any platform for your applications, you are not going to be a competitor let alone a market leader in the global economy.

The CME has its act together on electronic trading and how to do it with Globex. Globex is a key platform the CBOT products could be put on immediately if the CME takes it over. What does the ICE really have?

Who Benefits if the ICE Buys the CBOT?

Though some people who want the deal to go through with the CBOT and the ICE are looking at a sweeter deal in advance, they are either unaware or do not want to acknowledge that the deal would be a disaster down the road.

What does the ICE really offer as far as infrastructure platforms to get the CBOT into the electronic market? What is its strategic plan? Has the ICE really mapped out a winning architecture?

Though some say it is the CBOT traders who are pushing for the merger with the ICE, that really isn’t the case. When you look at the numbers, what they want really doesn’t matter. Who owns the most amounts of shares at this point? Is it the floor traders and seat holders or the large institutions?

It might be better to some large institutions that would not want the financial spotlight to shift to Chicago if the CME got the CBOT. They would rather see the ICE get the CBOT, and if it fizzles later, so what?

The merger between the CME and the CBOT could be very good if people would let it happen. Instead, there are contingents of groups thinking they understand the total picture. They don’t. They understand short-term profits and initial stock prices. They are clueless as to long-term business strategies.

Dumb Diligence

So many people boast of performing due diligence on big deals like this and how they have foolproof methodologies.

Their methodologies seem to gloss over technology issues either because they don’t see it as important or they don’t understand technology and would rather skip over it to make more of a traditional, analytical assessment.

I would call that “dumb diligence” because they are missing a key factor in their review. These are the same people who thought Iridium from Motorola was a “safe bet” and gave the nod to pour billions of dollars into a product that was overpriced and had to be taken outside to make a phone call.

While no one seems to take credit on that mega blunder, many people saw billions of dollars lost on a sure thing that was touted by lots of analysts. Is the CBOT decision the next mega mistake for the pension funds?

Carlinism: Know critical technology and network infrastructure or no technology and network infrastructure will be your ultimate demise.