CME Group

Last updated

CME Group Inc.
FormerlyChicago Mercantile Exchange Holdings Inc.
Company type Public
IndustryFinancial Services
FoundedOldest exchange 1848;176 years ago (1848);
Merger 2007;17 years ago (2007)
Headquarters Chicago, Illinois, United States
Key people
 Terrence A. Duffy
(chairman & CEO)
Lynne Fitzpatrick
(CFO) [1]
RevenueIncrease2.svg US$5.589 billion (2023)
Increase2.svgUS$3.436 billion (2023)
Increase2.svgUS$3.226 billion (2023)
Total assets Decrease2.svgUS$129.7 billion (2023)
Total equity Decrease2.svgUS$26.74 billion (2023)
Number of employees
c. 3,565 (2023)
Subsidiaries
Website cmegroup.com
Footnotes /references
[2]
President George W. Bush at the CME on March 6, 2001 Chicago Mercantile Exchange (G. Bush).jpg
President George W. Bush at the CME on March 6, 2001

CME Group Inc. is a financial services company. Headquartered in Chicago, the company operates financial derivatives exchanges including the Chicago Mercantile Exchange, Chicago Board of Trade, New York Mercantile Exchange, and The Commodity Exchange. The company also owns 27% of S&P Dow Jones Indices. [2] [3] [4] [5] It is the world's largest operator of financial derivatives exchanges. Its exchanges are platforms for trading in agricultural products, currencies, energy, interest rates, metals, futures contracts, options, stock indexes, and cryptocurrencies futures.

Contents

In addition to its headquarters in Chicago, [6] [7] the company also has offices in New York, Houston, and Washington D.C., in the U.S., as well as abroad in Bangalore, Beijing, Belfast, Calgary, Hong Kong, London, Seoul, Singapore, and Tokyo. [8]

History

The Chicago Mercantile Exchange (CME), was founded in 1898 as a nonprofit corporation. [2] In 1919, it established its clearing house. [2] In 2000, CME demutualized (became a joint stock company). [2] In 2002, CME Group, the parent company of CME, became a public company via an initial public offering. [2]

On July 12, 2007, CME Group completed a merger with the CME's historical rival, the holding company for the Chicago Board of Trade, founded in 1848, in an $8 billion deal that created the world's largest financial market. [9] [10] [11] The company then launched as CME Group Inc., a CME/Chicago Board of Trade Company. [12] [13]

In 2012, Phupinder Gill, then CME Group's president and COO, became the company's CEO.

In November 2016, Gill retired from his role and Terrence A. Duffy, then executive chairman and president of the company, took on an expanded role as its CEO. [14]

In 2021, the firm struck a partnership with Google to build its cloud strategy, which saw the tech giant investing $1 billion in CME Group. [15]

In 2022, CME Group futures and options reached a record average daily volume of 23.3 million contracts. [16]

Mergers and acquisitions

On August 22, 2008, CME Group acquired New York Mercantile Exchange (NYMEX), owner of both the NYMEX exchange and the Commodity Exchange (COMEX), for $8.9 billion in cash and CME Group stock. [17] [18] [19] [20] [21]

On February 10, 2010, CME Group agreed to purchase 90% of Dow Jones & Company's financial-indexes business, including the Dow Jones Industrial Average. [22] [23] CME Group and Dow Jones & Company subsequently contributed the Dow Jones Indexes to the formation of S&P Dow Jones Indices joint venture, with CME Group receiving a 24.4% ownership interest and Dow Jones & Company receiving a 2.6% ownership interest in the joint venture. [24] [25] In April 2013, CME Group purchased the remaining Dow Jones & Company interest for $80.0 million, increasing CME Group's interest in S&P Dow Jones Indices from 24.4% to 27.0%. [26]

On December 3, 2012, CME Group acquired the Kansas City Board of Trade, the dominant venue for the sale of hard red winter wheat, for $126 million in cash. [27] [28]

On March 15, 2016, the firm announced the sale of its suburban Chicago data center in Aurora, IL to CyrusOne for $130 million, in a leaseback transaction. [29]

On November 2, 2018, CME Group acquired the London-based NEX Group for $5.5 billion. [30] [31]

Operations

CME Group operates a global derivatives marketplace that allows institutions and individuals to trade futures and options based on interest rates, equity indexes, foreign exchange, energy, metals, and agricultural commodities. [32] [6] [7] The company runs an electronic trading platform, CME Globex, which allows customers in approximately 150 countries to trade futures and options contracts. [33] [34] [35]

The company also operates two cash market businesses: BrokerTec, which facilitates dealer-to-dealer trading for fixed-income markets, [36] [37] and EBS, which provides foreign exchange spot trading. [38]

In addition, CME Group operates CME Clearing, which serves as a counterparty to every cleared transaction, including both listed and OTC derivatives, within the company's marketplace. CME Group is a member of CCP Global, a trade group of central counterparty clearinghouses from around the globe. [39] [40]

Board governance

CME Group's history of member-owned exchanges and mergers and acquisition of rivals have led to an unconventionally large board size for a publicly traded company. In 2018, six of its 20 sitting board directors were elected by holders of Class B shares, representing owners of exchange seats, as opposed to that of publicly traded Class A shares. In comparison, the average company in the S&P 500 had no more than 11 board directors. [41]

On August 23, 2018, the company offered holders of Class B shares about $10 million to relinquish control of their six board seats. [42] The move was subsequently rejected.

Notable events

2010 flash crash

CME Group was at the center of the 2010 flash crash, which took place on May 6, 2010. According to a Commodity Futures Trading Commission (CFTC) 2014 report, a significant cause of the event was the use of spoofing algorithms by Navinder Singh Sarao, a British financial trader; just prior to the flash crash, he placed orders for thousands of E-mini S&P 500 stock index futures contracts — which traded on CME Group's Globex platform — and later replaced or modified those orders at least 19,000 times before they were cancelled. [43] [44] The event led to the modern day implementation of coordinated cross-market circuit breakers, as the CME's Globex platform halted trading in an automated response to the activity, while the New York Stock Exchange did not. [45] [46]

Awards and honors

See also

Related Research Articles

<span class="mw-page-title-main">Commodity market</span> Physical or virtual transactions of buying and selling involving raw or primary commodities

A commodity market is a market that trades in the primary economic sector rather than manufactured products, such as cocoa, fruit and sugar. Hard commodities are mined, such as gold and oil. Futures contracts are the oldest way of investing in commodities. Commodity markets can include physical trading and derivatives trading using spot prices, forwards, futures, and options on futures. Farmers have used a simple form of derivative trading in the commodities market for centuries for price risk management.

<span class="mw-page-title-main">S&P 500</span> American stock market index

The Standard and Poor's 500, or simply the S&P 500, is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States. It is one of the most commonly followed equity indices and includes approximately 80% of the total market capitalization of U.S. public companies, with an aggregate market cap of more than $43 trillion as of January 2024.

In finance, a futures contract is a standardized legal contract to buy or sell something at a predetermined price for delivery at a specified time in the future, between parties not yet known to each other. The asset transacted is usually a commodity or financial instrument. The predetermined price of the contract is known as the forward price or delivery price. The specified time in the future when delivery and payment occur is known as the delivery date. Because it derives its value from the value of the underlying asset, a futures contract is a derivative.

A futures exchange or futures market is a central financial exchange where people can trade standardized futures contracts defined by the exchange. Futures contracts are derivatives contracts to buy or sell specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future. Futures exchanges provide physical or electronic trading venues, details of standardized contracts, market and price data, clearing houses, exchange self-regulations, margin mechanisms, settlement procedures, delivery times, delivery procedures and other services to foster trading in futures contracts. Futures exchanges can be integrated under the same brand name or organization with other types of exchanges, such as stock markets, options markets, and bond markets. Futures exchanges can be organized as non-profit member-owned organizations or as for-profit organizations. Non-profit, member-owned futures exchanges benefit their members, who earn commissions and revenue acting as brokers or market makers; they are privately owned. For-profit futures exchanges earn most of their revenue from trading and clearing fees, and are often public corporations.

<span class="mw-page-title-main">Chicago Mercantile Exchange</span> Financial and commodity derivative exchange

The Chicago Mercantile Exchange (CME) is a global derivatives marketplace based in Chicago and located at 20 S. Wacker Drive. The CME was founded in 1898 as the Chicago Butter and Egg Board, an agricultural commodities exchange. For most of its history, the exchange was in the then common form of a non-profit organization, owned by members of the exchange. The Merc demutualized in November 2000, went public in December 2002, and merged with the Chicago Board of Trade in July 2007 to become a designated contract market of the CME Group Inc., which operates both markets. The chairman and chief executive officer of CME Group is Terrence A. Duffy, Bryan Durkin is president. On August 18, 2008, shareholders approved a merger with the New York Mercantile Exchange (NYMEX) and COMEX. CME, CBOT, NYMEX, and COMEX are now markets owned by CME Group. After the merger, the value of the CME quadrupled in a two-year span, with a market cap of over $25 billion.

<span class="mw-page-title-main">Chicago Board of Trade</span> Options and futures exchange in Chicago

The Chicago Board of Trade (CBOT), established on April 3, 1848, is one of the world's oldest futures and options exchanges. On July 12, 2007, the CBOT merged with the Chicago Mercantile Exchange (CME) to form CME Group. CBOT and three other exchanges now operate as designated contract markets (DCM) of the CME Group.

<span class="mw-page-title-main">New York Mercantile Exchange</span> American futures exchange

The New York Mercantile Exchange (NYMEX) is a commodity futures exchange owned and operated by CME Group of Chicago. NYMEX is located at One North End Avenue in Brookfield Place in the Battery Park City section of Manhattan, New York City.

An interest rate future is a futures contract with an interest-bearing instrument as the underlying asset. It is a particular type of interest rate derivative. Examples include Treasury-bill futures, Treasury-bond futures and Eurodollar futures.

A commodity broker is a firm or an individual who executes orders to buy or sell commodity contracts on behalf of the clients and charges them a commission. A firm or individual who trades for his own account is called a trader. Commodity contracts include futures, options, and similar financial derivatives. Clients who trade commodity contracts are either hedgers using the derivatives markets to manage risk, or speculators who are willing to assume that risk from hedgers in hopes of a profit.

<span class="mw-page-title-main">Intercontinental Exchange</span> American exchange and clearing house company

Intercontinental Exchange, Inc. (ICE) is an American multinational financial services company formed in 2000 that operates global financial exchanges and clearing houses and provides mortgage technology, data and listing services. Listed on the Fortune 500, S&P 500, and Russell 1000, the company owns exchanges for financial and commodity markets, and operates 12 regulated exchanges and marketplaces. This includes ICE futures exchanges in the United States, Canada, and Europe; the Liffe futures exchanges in Europe; the New York Stock Exchange; equity options exchanges; and OTC energy, credit, and equity markets.

The Dubai Mercantile Exchange (DME) is a commodity exchange based in Dubai currently listing its flagship futures contract, DME Oman Crude Oil Futures Contract (OQD). Launched in 2007, the DME aims to become the crude oil pricing benchmark for the Asian market with its Oman Crude Oil contract, like the Intercontinental Exchange’s (ICE) North Sea Brent is to Europe and the New York Mercantile Exchange’s (NYMEX) West Texas Intermediate is to North America.

NASDAQ futures are financial futures which launched on June 21, 1999. It is the financial contract futures that allow an investor to hedge with or speculate on the future value of various components of the NASDAQ market index.

Launched by the Dubai Mercantile Exchange (DME) on 1 June 2007, the DME Oman Crude Oil Futures Contract (OQD) is the Asian crude oil pricing benchmark. The contract is traded on the CME Group’s electronic platform CME Globex, and cleared through CME Clearport.

<span class="mw-page-title-main">Richard L. Sandor</span>

Richard L. Sandor is an American businessman, economist, and entrepreneur. He is chairman and CEO of the American Financial Exchange (AFX) established in 2015, which is an electronic exchange for direct interbank/financial institution lending and borrowing. The AFX flagship product, the AMERIBOR benchmark index, reflects the actual borrowing costs of thousands of regional and community banks across the U.S. and is one of the short-term borrowing rates, along with the Secured Overnight Financing Rate, vying to replace U.S. dollar Libor as a benchmark in the U.S.

<span class="mw-page-title-main">Terrence A. Duffy</span> American businessman (born 1958)

Terrence A. Duffy is an American businessman. He is the chairman and chief executive officer of CME Group, a derivatives marketplace based in Chicago, Illinois.

Dow Futures are financial futures which allow an investor to hedge with or speculate on the future value of various components of the Dow Jones Industrial Average market index. The futures instruments are derived from the Dow Jones Industrial Average as E-mini Dow Futures.

S&P 500 Futures are financial futures which allow an investor to hedge with or speculate on the future value of various components of the S&P 500 Index market index. S&P 500 futures contracts were first introduced by the Chicago Mercantile Exchange in 1982. The CME added the e-mini option in 1997. The bundle of stocks in the S&P 500 is, per the name, composed of stocks of 500 large companies.

The Globex Trading System is a electronic trading platform for trading both futures contracts and options contracts that is operated by the Chicago Mercantile Exchange (CME).

Mercantile Exchange of Vietnam (MXV) is the only national centralized commodity trading market organizer in Vietnam, licensed by the Vietnam Ministry of Industry & Trade.

References

  1. ↑ "CME Group CFO Pietrowicz to retire next year". Reuters . February 17, 2022. Retrieved June 22, 2023.
  2. 1 2 3 4 5 6 "US SEC: Form 10-K CME Group Inc". U.S. Securities and Exchange Commission. February 28, 2024.
  3. ↑ Stafford, Phillip (May 9, 2019). "CME gains boost with new 'micro' futures contracts". The Financial Times.
  4. ↑ "CME looks to the futures in Europe". Futures & Options World. June 3, 2014.
  5. ↑ "CME Group: The futures of capitalism". The Economist . May 11, 2013.
  6. 1 2 "CME Group Inc.: CME Stands to Benefit From Rising Interest Rates as Volatility Returns to Its Markets". Yahoo! Finance . Yahoo! . Retrieved September 11, 2022.
  7. 1 2 "CME Group Inc. CI A". Wall Street Journal. Dow Jones & Company, Inc. Retrieved September 11, 2022.
  8. ↑ "Advancing A Sustainable Future: 2021 Environmental, Social & Governance Report" (PDF). CME Group. 2021. p. 5. Retrieved September 11, 2022.
  9. ↑ Barrionuevo, Alexei (October 18, 2006). "2 Exchanges in Chicago Will Merge". The New York Times. Retrieved November 9, 2022.
  10. ↑ Lucchetti, Aaron; MacDonald, Alistair; Taylor, Edward (October 18, 2006). "Chicago Merc to Buy Board of Trade". The Wall Street Journal. Dow Jones & Company, Inc. Retrieved November 9, 2022.
  11. ↑ Krasny, Ros (July 9, 2007). "CME buy of CBOT easily approved by shareholders". Reuters. Retrieved November 9, 2022.
  12. ↑ Krasny, Ros (July 12, 2007). "CBOT shares to be delisted at close of trade". Reuters. Retrieved November 9, 2022.
  13. ↑ "CME and CBOT Complete Merger Creating the Leading Global Financial Exchange". CME Group. July 12, 2007. Retrieved November 9, 2022.
  14. ↑ Basar, Shanny. "Exchanges Oppose FTX Clearing Proposal Before Congress". Traders Magazine. Markets Media Holdings LLC. Retrieved September 11, 2022.
  15. ↑ "Google Invests $1 Billion in Exchange Giant CME, Strikes Cloud Deal".
  16. ↑ ""CME Group Reports Record Average Daily Volume of 23.3 Million Contracts Traded in 2022, an Increase of 19%"" (Press release).
  17. ↑ Michael Molina; Xiaobing Li, eds. (2014). Oil: A Cultural and Geographic Encyclopedia of Black Gold. ABC-CLIO. p. 203. ISBN   9781610692724 . Retrieved November 9, 2022.
  18. ↑ "CME Group Inc. Completes Acquisition of NYMEX Holdings, Inc., Expands its Diversified Product Offerings to Include Energy and Metals and Also Announces Preliminary Election Results". CME Group. August 22, 2008. Retrieved November 9, 2022– via U.S. Securities and Exchange Commission.
  19. ↑ de la Merced, Michael (January 29, 2008). "Commodities Markets in New York and Chicago Discuss Merger". The New York Times. Retrieved November 9, 2022.
  20. ↑ Leising, Matthew (March 18, 2008). "Largest futures market to acquire Nymex Holdings". Bloomberg News. Retrieved November 9, 2022– via The Philadelphia Inquirer.
  21. ↑ "CME Group Inc. to Acquire NYMEX Holdings, Inc. on Terms Previously Announced". CME Group. March 17, 2008. Retrieved November 9, 2022.
  22. ↑ Berman, Dennis K.; Mccracken, Jeffrey (February 11, 2010). "CME Buys 90% of Dow Jones Indexes". The Wall Street Journal.
  23. ↑ Spicer, Jonathan (February 10, 2010). "CME buys 90 percent of Dow indexes in joint venture". Reuters. Retrieved November 9, 2022.
  24. ↑ Leising, Matthew (July 2, 2012). "McGraw-Hill, CME Group Start S&P Dow Jones Indices Venture". Bloomberg. Retrieved December 6, 2013.
  25. ↑ Smith, Simon (July 3, 2012). "S&P Dow Jones Indices formed from merger of S&P Indices and Dow Jones Indexes". ETF Strategy. Retrieved November 9, 2022.
  26. ↑ "Item 1. | Business | General Development of Business". Form 10-K for the Fiscal Year Ended December 31, 2014 (Report). CME Group Inc. February 26, 2015. Retrieved June 8, 2018. In April 2013, we purchased the [remaining] non-controlling interest ... from Dow Jones & Company ... increase in our ownership to 27% of the S&P/Dow Jones Indices LLC ...
  27. ↑ Dornbrook, James (December 3, 2012). "CME Group wraps up $126M acquisition of Kansas City Board of Trade". Kansas City Business Journal. American City Business Journals. Retrieved November 9, 2022.
  28. ↑ "CME Group to Acquire Kansas City Board of Trade" (Press release). Chicago / Kansas City, Missouri. October 17, 2012. Retrieved April 8, 2016.
  29. ↑ "CME group announces agreement to sell Aurora Data center to Cyrusone". Reuters .
  30. ↑ Sozzi, Brian (March 29, 2018). "CME Group Agrees $5.5 Billion Merger With Britain's NEX". TheStreet. Retrieved November 9, 2022.
  31. ↑ "CME Group acquires Nex". November 2, 2018.
  32. ↑ Stowell, David (2012). Investment Banks, Hedge Funds, and Private Equity. US: Elsevier Science. ISBN   9780124158207 . Retrieved September 11, 2022.
  33. ↑ Jensen, Jones (2016). Investment: Analysis and Management. US: Wiley. p. 105. ISBN   9781118975589 . Retrieved September 11, 2022.
  34. ↑ Sterk, Ron (August 8, 2022). "From chalkboards to computers, futures evolve with the market". Milling & Baking News. Sosland Publishing. Retrieved September 11, 2022.
  35. ↑ "The CME Group of exchanges". Business Line . Kasturi & Sons. September 16, 2018. Retrieved September 12, 2022.
  36. ↑ McAughtry, Laurie (September 8, 2022). "CME Group continues SOFR conversions as demand grows". The Trade. Tungsten Publishing. Retrieved September 11, 2022.
  37. ↑ Basar, Shanny (April 4, 2021). "BrokerTec Benefits From Migration To CME Globex". Markets Media. Markets Media Holdings LLC. Retrieved September 12, 2022.
  38. ↑ Oladipupo, Solomon (February 8, 2022). "CME Group's EBS Spot FX ADNV Rises 12% YoY to $64.5 Billion in July". Finance Magnates. Finance Magnates CY Ltd. Retrieved September 11, 2022.
  39. ↑ Soumaré, Issouf (2012). Commodity Exchanges: Concepts, Tools and Guidelines. US: Edward Elgar Publishing. p. 219. ISBN   978-1800887039 . Retrieved September 11, 2022. CME Group provides clearing services for customers around the globe through its clearing house, CME Clearing, which allows them to significantly mitigate and manage their counterparty risk. CME Clearing is an intermediary between buyers and sellers in the derivatives market.
  40. ↑ "Derivatives Clearing 2014" (PDF). FIA Europe. 2014. Retrieved September 11, 2022. In derivatives markets we now see fragmentation of clearing across the likes of CME Clearing, ICE Clear, LCH.Clearnet and Eurex, not to mention the Asian clearing houses, for both OTC and exchange centrally cleared products.
  41. ↑ "Finally, CME honors its investors".
  42. ↑ "CME aims to take another step away from its members-only past".
  43. ↑ Vuorenmaa, Tommi; Wang, Liang (October 2013), "An Agent-Based Model of the Flash Crash of May 6, 2010, with Policy Implications", VALO Research and University of Helsinki, SSRN   2336772
  44. ↑ Brush, Silla; Schoenberg, Tom; Ring, Suzi (April 22, 2015), ""How a Mystery Trader with an Algorithm May Have Caused the Flash Crash"", Bloomberg News, retrieved April 25, 2015
  45. ↑ Subrahmanyam, Avanidhar (September 2013). ""Algorithmic trading, the Flash Crash, and coordinated circuit breakers"". Borsa Istanbul Review. 13 (3): 4–9. doi: 10.1016/j.bir.2013.10.003 .
  46. ↑ "Investor Bulletin: Measures to Address Market Volatility".
  47. ↑ "Corporate Equality Index 2019" (PDF). Human Rights Campaign Foundation. 2019. Retrieved November 14, 2022.
  48. ↑ "Corporate Equality Index 2020" (PDF). Human Rights Campaign Foundation. 2020. Retrieved November 14, 2022.
  49. ↑ "CEI 2021 - Appendix A: Employer Ratings" (PDF). Human Rights Campaign Foundation. 2021. Retrieved November 14, 2022.
  50. ↑ "CEI 2022 - Appendix A: Employer Ratings" (PDF). Human Rights Campaign Foundation. 2022. Retrieved November 14, 2022.
  51. ↑ "The Blockchain 50". Forbes. February 2, 2021. Retrieved November 14, 2022.
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  53. ↑ "CME Group Awards". CME Group. Retrieved November 14, 2022.
  54. ↑ "IMD & IRD Awards 2022: Best market data (exchange)—CME Group".
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