CME Group and the Brazilian Mercantile & Futures Exchange Agree to Cross-Equity Stakes and Exclusive Order Routing Deal
October 23 2007 - 6:59PM
PR Newswire (US)
Long-term partnership may be expanded to joint product development,
off-shore collateral management services and clearing access
arrangements. CHICAGO and SAO PAULO, Brazil, Oct. 23
/PRNewswire-FirstCall/ -- CME Group, the world's largest and most
diverse exchange, and the Brazilian Mercantile & Futures
Exchange S.A. (BM&F), the world's fourth largest derivatives
exchange and the largest derivatives exchange in Latin America,
announced today that they have signed a non-binding letter of
intent covering a proposed cross-investment between them. Under the
arrangement, CME Group will acquire an equity stake of
approximately 10 percent in BM&F in exchange for an equity
stake of approximately two percent in CME Group. The transaction is
expected to be completed following the close of BM&F's initial
public offering, which is expected to occur this year. The
agreement would represent the first-ever cross-equity arrangement
between a U.S. and Latin American exchange. The agreement will be
exclusive to BM&F among exchanges in Central and South America,
and exclusive to CME among exchanges outside of that region or
China. The investment agreement will include a provision to permit
termination if the agreements are not completed and the investment
transaction is not closed by March 31, 2008. The letter of intent
also contemplates the establishment of an order-routing arrangement
in which CME Group would connect its CME Globex(R) electronic
distribution network to BM&F, and BM&F would connect its
distribution network to CME Globex, for the routing of orders for
electronic trading of the products of both exchanges. The
order-routing arrangement would be exclusive to CME as an exchange
provider of order-routing services to BM&F outside of Central
and South America, and exclusive to BM&F among exchanges in
that region. CME Group and BM&F also expect to enter into a
memorandum of understanding covering the expansion of their
commercial arrangements. Additional commercial arrangements to be
considered include the following: -- CME Group to provide offshore
collateral management services to the BM&F clearinghouses for
non-Brazilian Real denominated collateral posted by BM&F
customers outside Brazil; -- BM&F to become a "super-clearing"
member of CME Group to facilitate access to CME Group products on
behalf of BM&F market participants that lack independent
arrangements with CME Group clearing members; and, -- CME and
BM&F to establish a joint working group comprised of product
development representatives from both exchanges. The joint working
group will explore opportunities to develop and market new products
for the Brazilian and Latin American markets to take advantage of
the expertise, distribution and resources of both exchanges. The
BM&F Board of Directors will also include one director
designated by CME Group and CME Group will establish a special
board advisory committee to the CME Group Board, including
representation from BM&F, to periodically evaluate progress on
the CME-BM&F arrangements. "We are very pleased that we are
forging a long-term strategic partnership between CME Group and
BM&F," said CME Executive Chairman Terry Duffy. "South America
represents a key market of opportunity for CME Group as we seek to
expand the reach of our benchmark products to customers outside the
U.S. This agreement allows us to extend our products to potential
new users in Brazil." "With our historic merger with CBOT now
completed, CME Group is continuing to aggressively execute our
global growth strategy in important emerging markets. Today's
announcement positions CME Group as the first global exchange to
tap into the fast-growing Brazilian and Latin American markets,"
said CME Group Chief Executive Officer Craig Donohue. "With
Brazil's emergence as the world's tenth largest economy, its
growing capital markets, and its established commodity markets, we
look forward to developing this link between our markets." CME
Group and BM&F are working toward signing definitive
agreements. The proposed cross-investment and order routing
agreement will only proceed if the parties sign definitive
agreements, which are subject to completion of due diligence and
final board approval by CME Group and BM&F. Closing of the
equity exchange is also subject to the completion of BM&F's
initial public offering, BM&F shareholder approval and other
customary closing conditions, including Brazilian regulatory
approval. There can be no assurance that any definitive agreements
will be signed or, even if signed, that all conditions to
completion will be met. About CME Group CME Group
(http://www.cmegroup.com/) is the world's largest and most diverse
exchange. Formed by the 2007 merger of the Chicago Mercantile
Exchange (CME) and the Chicago Board of Trade (CBOT), CME Group
serves the risk management needs of customers around the globe. As
an international marketplace, CME Group brings buyers and sellers
together on the CME Globex electronic trading platform and on its
trading floors. CME Group offers the widest range of benchmark
products available across all major asset classes, including
futures and options based on interest rates, equity indexes,
foreign exchange, agricultural commodities, and alternative
investment products such as weather and real estate. CME Group is
traded on the New York Stock Exchange and NASDAQ under the symbol
"CME." About BM&F The Brazilian Mercantile & Futures
Exchange is a marketplace for derivatives trading and a risk
management facility through its Derivatives, Foreign Exchange, and
Asset Clearinghouses. In 2006, BM&F traded an average daily
volume of 1.116 million contracts -- based on interest rates,
currencies, stock indices, agricultural commodities, such as
cattle, coffee, corn, sugar and ethanol, among others -- with an
average daily financial volume of USD42.9 billion (notional value).
Statements in this news release that are not historical facts are
forward-looking statements. These statements are not guarantees of
future performance and involve risks, uncertainties and assumptions
that are difficult to predict. Therefore, actual outcomes and
results may differ materially from what is expressed or implied in
any forward-looking statements. Detailed information about factors
that may affect the performance of CME Group may be found in its
filings with the Securities and Exchange Commission, including our
most recent Quarterly Report on Form 10-Q, which is available in
the Investor Relations section of the CME Group Web site.
Additionally, the proposed cross-investment and commercial
arrangement transaction with BM&F is subject to negotiation of
definitive agreements, BM&F shareholder approval, customary
closing conditions and receipt of all regulatory approvals and we
cannot assure you that such agreements or conditions will be
satisfied. We undertake no obligation to publicly update any
forward-looking statements, whether as a result of new information,
future events or otherwise. CME-G DATASOURCE: CME Group CONTACT:
Media, Allan Schoenberg, +1-312-930-8189, or Mary Haffenberg,
+1-312-930-3435, , or Investors, John Peschier, +1-312-930-8491,
all of CME Group Web site: http://www.cme.com/
http://www.cmegroup.com/
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