UPDATE: CME Vows 'Organic' Growth As NYSE Bid Rumors Swirl

CME Group Inc. (CME) on Tuesday sought to quash speculation that it may make a counter bid for NYSE Euronext (NYX) as its executive chairman said dismantling the exchange group seemed unrealistic.

The Chicago-based exchange operator has been the subject of intense speculation about a move to defend its position as the global market leader, with media reports pointing to its teaming with Nasdaq Group OMX Inc. (NYX) for a counteroffer and keeping only NYSE's derivatives unit.

"I don't know how realistic it would be to take that company apart," CME Executive Chairman Terry Duffy said of NYSE Euronext during an interview with CNBC.

Duffy also said he hadn't talked to NYSE Euronext CEO Duncan Niederauer.

The planned combination of NYSE Euronext and Deutsche Boerse AG (DB1.XE) would overtake the Chicago-based company in the global futures sector. CME's own deal-making over the past five years had cemented its position as the dominant force in the U.S. with an expanding global franchise.

"We're not going to let [M&A activity] deter our focus from our core business," Duffy told reporters in Washington, D.C., earlier Tuesday. "We are also very mindful of the transactions that are going on around the world."

The company, which operates the Chicago Mercantile Exchange, the Chicago Board of Trade and the New York Mercantile Exchange, had earlier issued a statement that said it was committed to "organic growth opportunities" in its derivatives and index businesses.

Representatives declined to comment on "rumors or speculation."

The regulatory issues involved in any potential Nasdaq-NYSE combination had led some observers to handicap any CME move in favor of a standalone bid for NYSE Euronext.

CME has in the past strenuously denied interest in entering the cash equities business because of its low margins and regulatory complexities, and Duffy's comments would appear to distance itself from such a move.

CME Chief Executive Craig Donohue last summer told investors that the company would eschew the sort of large-scale dealmaking that vaulted CME far ahead of rivals over the past decade. CME spent about $20 billion in purchases of the CBOT and Nymex ahead of the 2008 financial crisis, but the company's value has roughly halved since then to around $19.5 billion.

The company was reported Monday to be exploring a possible counteroffer for NYSE Euronext, with Nasdaq OMX as its potential partner in such a deal. Fox Business Network reported Tuesday that the two exchanges were meeting to discuss strategy. Fox Business Network is owned by News Corp. (NWSA, NWS.AU), which also owns Dow Jones & Co., publisher of The Wall Street Journal and Dow Jones Newswires.

CME had expressed interest in acquiring Euronext before the Paris-based group was acquired by NYSE in 2007. That plan would have seen CME keeping its Liffe derivatives business and jettisoning the equities unit, according to people familiar with the situation at the time.

Liffe has since expended with the launch of a fledgling U.S. operation that is seen as the main potential rival to CME.

The yet-to-be-named Deutsche Boerse-NYSE combination would mirror CME's own dominance in interest-rate derivatives secured through the CBOT takeover, and provide the enlarged company with an opportunity to challenge its rival in the U.S. and Asia.

Responding to questions from reporters, CME's Duffy said it wasn't his place to decide whether the proposed merger of NYSE Euronext and Deutsche Boerse should pose regulatory concerns because of the huge share of the European derivatives market the combined entity would have.

"That's not for me to decide. What's for me to decide is to compete with the world," Duffy said. "Yes, they are a formidable competitor, but so are we."

CME's pledge to focus on organic growth also damped speculation of a bid for Chicago-based CBOE Holdings Inc. (CBOE), operator of the largest U.S. options exchange.

However, the new round of industry dealmaking triggered by last autumn's announcement of a planned combination of Singapore Exchange and Australia's ASX Ltd. (ASX.AU) is forcing executives across the industry to reassess their positions.

Last week, Canadian market operator TMX Group (X.T) and London Stock Exchange Group PLC (LSE.LN) agreed on their own "merger of equals."

"Like everyone else, we're watching what's going on," said Duffy.

CME shares ended down 3.7% at $291.33, but later recovered to be up 0.4% at $292.46 in after-hours trade.

-By Jacob Bunge, Dow Jones Newswires; 312-750-4117; jacob.bunge@dowjones.com

--Doug Cameron contributed to this article.

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