This morning we had another monumental merger among financial exchanges. The Chicago Mercantile Exchange (CME) is acquiring the Chicago Board of Trade (BOT) in an $8 billion transaction. That translates to a roughly 15% premium from the close for BOT shares, and if the deal closes in all stock, the CBOT will own 31% of the combined entity.

CME would issue approximately 15.9 million shares if the all stock route is taken. Based on the closing stock prices of CME and CBOT on October 16, 2006, the last trading day prior to the announcement of the merger, the combined company is valued at $25 billion (CME equity $18 billion; CBOT equity $7 billion). The merger will not impact core trading rights or membership or clearing privileges at either exchange.

"We are very pleased to announce this strategic merger today," said CME Chairman Terry Duffy, who will be the chairman of the combined organization. "We now will be able to combine the capabilities and best practices of both organizations -- establishing an even stronger, more competitive position than either could achieve individually."

Duffy may believe this merger benefits consumers and shareholders; however, consolidation in financial exchanges can be horrible for the consumer (exchange clients and traders) because the exchange gets to dictate pricing with essentially no competition and no choices.

Both NASDAQ and NYSE have made changes recently to their level 2 feed and equivalent to third parties that are not good for consumers. Now that they own most of the ECN's they can charge whatever they want to third parties. Calling for a blockage of a merger is never a fun situation to be in, but these mega-exchanges are BAD for (traders/consumers). Mark my words.

Most exchanges stocks are higher on this news today: Intercontinental Exchange (ICE) +5% at $80.90; NASDAQ (NDAQ) +1% at $34.89, and International Securities Exchange (ISE) +3% at $50.23. NYSE (NYX), however, is down .4% at $73.58 as of 12:30 p.m.

Jon Ogg is a partner in 24/7 Wall St.