UPDATE: CME Sees No Regulatory Bar To Trading Securities
October 29 2009 - 10:43AM
Dow Jones News
The top executive of CME Group Inc. (CME) on Thursday said
regulatory issues did not bar the exchange operator from a move
into the securities business.
The world's largest futures exchange operator has so far steered
clear of stock trading or equity options, unlike many rivals.
Chief Executive Craig Donohue did not pledge a move into
securities despite being linked with a bid for the largest U.S.
options platform, but the rapid growth in futures trading seen over
the past five years has been replaced by more robust growth in
options and equities.
CME has resisted listing cash equities and options in part
because of the rules-based oversight used by the U.S. Securities
and Exchange Commission, which contrasts with the principles-based
approach of the CME's existing regulator.
Donohue dismissed that idea that the regulatory divergence tied
CME's hands.
"The fact that the security markets have a different regulatory
regime is not in itself a barrier for us," Donohue said on a call
to discuss third-quarter earnings. "We look more at the fundamental
characteristics of those things, if it's a good fit for us, and if
we can be successful as a competitor."
He and fellow executives have in the past said customers had not
sought to trade multiple asset classes on a single platform.
Donohue's comments followed a report last week in Crain's
Chicago Business that CME had put out "feelers" regarding a
possible acquisition of the Chicago Board Options Exchange.
CME on Thursday reported a 20% rise in third-quarter earnings,
beating market expectations for the second time in a row despite a
write-down on an overseas exchange investment.
The Chicago-based exchange operator reported net profit of $202
million, or $3.04 a share, in the three months ended Sept. 30, amid
an uptick in volume after a sustained period of falling
transactions. This compared with $169 million, or $2.81 a share a
year earlier. Revenue fell 4% to $650 million.
Pro forma earnings dipped 19% to $3.35 a share in the quarter,
ahead of the $3.29 a share consensus among analysts.
CME shares were down 0.9% at $305.24 in early trading.
The quarter included a $19 million write-down on the value of
Imarex, a Norwegian exchange acquired with its purchase of the
parent of the New York Mercantile Exchange, as well as $2 million
in merger-related expenses.
CME's operating margin remained among the highest in the
industry at 62.5%--level with the prior quarter though down from
65.5% a year earlier. Executive Chairman Terry Duffy noted in a
statement that volume had improved in October, notably in currency
and energy contracts.
-By Jacob Bunge, Dow Jones Newswires; (312) 750 4117;
jacob.bunge@dowjones.com
(Doug Cameron contributed to this article.)