CME CME Group Inc

In order to expand its Globex platform, on Thursday, CME Group Inc. (CME) announced that it has signed a couple of Memorandum of Understanding (MoU) in Ukraine. This is an attempt to unravel new growth avenues from its commodity risk management services in the Eastern Europe.

 

Accordingly, CME has agreed upon a MoU with Government of Ukraine and the National Bank of Ukraine, which is the region’s central bank. Another MoU has been signed between the company and the Ukrainian Futures Exchange (UFE), which is a commodity exchange operator.

 

After successfully showcasing its capabilities and expertise in risk managing tools across Europe, Asia, the Middle East and Latin America, CME is now keen on establishing its footprint in other rapidly developing countries. Hence, CME is seeking fresh opportunities to develop the financial and derivative markets, particularly for grain and non-agricultural commodities, in Ukraine through its Globex platform.

 

With more than 30 million hectares of fertile lands along the Black Sea, Ukraine represents a developing economy model, which is expected to gain sufficiently from the CME Globex that will provide global access to risk management technology and services in the region’s commodity markets.

 

Over the past few years, an increasing percentage of CME’s volume is seen moving from open outcry format to the Globex electronic trading platform. Globex volume continues to grow to form a major part of the exchange’s total trading volume (from 57% in 2004 to 80% in 2008, 81% in 2009 and 83% in 2010). Given the company’s ongoing initiative of providing co-location services, Globex volume growth is further expected to add $30–$40 million in revenue from 2012 onwards.

 

Additionally, operational expansion in Europe is also crucial for CME’s sustainability and maintaining its competitive leverage. More essentially, now that the prime peer NYSE Euronext Inc. (NYX) is working diligently to merge with Deutsche Boerse and become the globally leading derivative exchange operator, CME needs to buckle up and tap all available expansion opportunities in order to propel long-term growth.

 

We believe although debt obligations, interest rate volatility and rising competition poses operational risk to the company, CME’s efforts to promote, expand and cross-sell its core exchange-traded business through newer product initiatives along with its global presence will generate a modest growth in the long run.

 

On Thursday, the shares of CME closed at $284.11, down 0.8%, on the Nasdaq Stock Exchange.

 
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