--CME's Nymex division to up stake to 50% post DME
recapitalization
--Oman Investment Fund to increase its holding to 29%
--A Dubai Holding subsidiary's stake will drop to 9% from
25%
--DME recapitalization to help growth plans
(Updates with background on Dubai Mercantile Exchange, CME
partnership.)
By Nikhil Lohade, Tim Falconer and Jacob Bunge
Of ZAWYA DOW JONES
CME Group Inc. (CME) said Tuesday that it will double its stake
in the Dubai Mercantile Exchange to 50%, eying expansion of a key
oil futures contract at a time when rival exchanges are reassessing
their role in the Gulf region.
Chicago-based CME will pay an undisclosed sum to lift its stake
despite still-small trading activity on the DME platform, which the
Chicago-based exchange operator of the New York Mercantile Exchange
has backed as providing a third global benchmark for crude oil
trade targeting suppliers in Asia.
The investment also underscores major exchange groups' refocused
efforts on building ties with smaller, foreign-based market
operators after a year's worth of mega-merger efforts fell apart
due to regulatory and nationalistic barriers.
The DME's flagship market is in Oman sour crude oil futures,
linked to Middle Eastern crude oil output that is heavier and
contains more sulfur than the light, sweet varieties represented by
the Nymex's market in West Texas Intermediate crude oil and Brent
crude oil, which is traded in London on markets run by
IntercontinentalExchange Inc. (ICE).
The Oman crude market was designed to lure Middle Eastern oil
producers wary that the pricing methodologies of WTI and Brent
don't accurately reflect regional supply and demand factors.
Trading volumes on the DME last year climbed 19% over 2010
levels with an average 3,505 contracts traded per day, far below
the 1.8 million energy contracts traded per day on CME's markets
last year. The DME ranked number 50 in terms of global derivatives
exchange trading activity in 2010, according to the most recent
data compiled by the Futures Industry Association.
DME's recapitalization will also see Oman Investment Fund
increase its holding to 29% from 25% in the exchange, while
diluting an investment company linked to the emirate's ruler. A
Dubai Holding unit's stake will drop to 9% from 25%.
The balance of 12% will be held on a non-voting basis by
strategic investors that include Vitol, Shell, JP Morgan, Morgan
Stanley, Goldman Sachs and Concord Energy.
CME is maintaining the DME as its Middle Eastern outpost at a
time when its biggest peers are reassessing their presence in the
region. Analysts expect NYSE Euronext (NYX) to re-examine its 20%
stake in the Qatar Exchange as Big Board executives look to pare
back some investments following a failed merger effort with
Deutsche Boerse AG (DB1.XE, DBOEF).
Nasdaq OMX Group Inc. (NDAQ) two years ago trimmed its own
exposure to the region in a sale of its Nasdaq Dubai market the
rival Dubai Financial Market, which left the New York exchange
group with a 1% stake in the combined platform.
-By Nikhil Lohade and Tim Falconer, Dow Jones Newswires, +9714
446 1694, nikhil.lohade@dowjones.com
Copyright (c) 2012 Dow Jones & Company, Inc.