CME Group and the Brazilian Mercantile & Futures Exchange Agree to Cross-Equity Stakes and Exclusive Order Routing Deal
Long-term partnership may be expanded to joint product development, off-shore collateral management services and clearing access arrangements.
PRNewswire-FirstCall
CHICAGO and SAO PAULO, Brazil
(:CME)
CHICAGO and SAO PAULO, Brazil, Oct. 23 /PRNewswire-FirstCall/ — CME
Group, the world’s largest and most diverse exchange, and the Brazilian
Mercantile & Futures Exchange S.A. (BM&F), the world’s fourth
largest derivatives exchange and the largest derivatives exchange in
Latin America, announced today that they have signed a non-binding
letter of intent covering a proposed cross-investment between them.
Under the arrangement, CME Group will acquire an equity stake of
approximately 10 percent in BM&F in exchange for an equity stake of
approximately two percent in CME Group. The transaction is expected to
be completed following the close of BM&F’s initial public offering,
which is expected to occur this year. The agreement would represent the
first-ever cross-equity arrangement between a U.S. and Latin American
exchange. The agreement will be exclusive to BM&F among exchanges
in Central and South America, and exclusive to CME among exchanges
outside of that region or China. The investment agreement will include
a provision to permit termination if the agreements are not completed
and the investment transaction is not closed by March 31, 2008.
The letter of intent also contemplates the establishment of an
order-routing arrangement in which CME Group would connect its CME
Globex® electronic distribution network to BM&F, and BM&F would
connect its distribution network to CME Globex, for the routing of
orders for electronic trading of the products of both exchanges. The
order-routing arrangement would be exclusive to CME as an exchange
provider of order-routing services to BM&F outside of Central and
South America, and exclusive to BM&F among exchanges in that region.
CME Group and BM&F also expect to enter into a memorandum of
understanding covering the expansion of their commercial arrangements.
Additional commercial arrangements to be considered include the
following:
-- CME Group to provide offshore collateral management services to the
BM&F clearinghouses for non-Brazilian Real denominated collateral
posted by BM&F customers outside Brazil;
-- BM&F to become a "super-clearing" member of CME Group to facilitate
access to CME Group products on behalf of BM&F market participants that
lack independent arrangements with CME Group clearing members; and,
-- CME and BM&F to establish a joint working group comprised of product
development representatives from both exchanges. The joint working
group will explore opportunities to develop and market new products for
the Brazilian and Latin American markets to take advantage of the
expertise, distribution and resources of both exchanges.
The BM&F Board of Directors will also include one director
designated by CME Group and CME Group will establish a special board
advisory committee to the CME Group Board, including representation
from BM&F, to periodically evaluate progress on the CME-BM&F
arrangements.
“We are very pleased that we are forging a long-term strategic
partnership between CME Group and BM&F,” said CME Executive
Chairman Terry Duffy. “South America represents a key market of
opportunity for CME Group as we seek to expand the reach of our
benchmark products to customers outside the U.S. This agreement allows
us to extend our products to potential new users in Brazil.”
“With our historic merger with CBOT now completed, CME Group is
continuing to aggressively execute our global growth strategy in
important emerging markets. Today’s announcement positions CME Group as
the first global exchange to tap into the fast-growing Brazilian and
Latin American markets,” said CME Group Chief Executive Officer Craig
Donohue. “With Brazil’s emergence as the world’s tenth largest economy,
its growing capital markets, and its established commodity markets, we
look forward to developing this link between our markets.”
CME Group and BM&F are working toward signing definitive
agreements. The proposed cross-investment and order routing agreement
will only proceed if the parties sign definitive agreements, which are
subject to completion of due diligence and final board approval by CME
Group and BM&F. Closing of the equity exchange is also subject to
the completion of BM&F’s initial public offering, BM&F
shareholder approval and other customary closing conditions, including
Brazilian regulatory approval. There can be no assurance that any
definitive agreements will be signed or, even if signed, that all
conditions to completion will be met.
About CME Group
CME Group (http://www.cmegroup.com/)
is the world’s largest and most diverse exchange. Formed by the 2007
merger of the Chicago Mercantile Exchange (CME) and the Chicago Board
of Trade (CBOT), CME Group serves the risk management needs of
customers around the globe. As an international marketplace, CME Group
brings buyers and sellers together on the CME Globex electronic trading
platform and on its trading floors. CME Group offers the widest range
of benchmark products available across all major asset classes,
including futures and options based on interest rates, equity indexes,
foreign exchange, agricultural commodities, and alternative investment
products such as weather and real estate. CME Group is traded on the
New York Stock Exchange and NASDAQ under the symbol “CME.”
About BM&F
The Brazilian Mercantile & Futures Exchange is a marketplace for
derivatives trading and a risk management facility through its
Derivatives, Foreign Exchange, and Asset Clearinghouses. In 2006,
BM&F traded an average daily volume of 1.116 million contracts —
based on interest rates, currencies, stock indices, agricultural
commodities, such as cattle, coffee, corn, sugar and ethanol, among
others — with an average daily financial volume of USD42.9 billion
(notional value).
Statements in this news release that are not historical facts are
forward-looking statements. These statements are not guarantees of
future performance and involve risks, uncertainties and assumptions
that are difficult to predict. Therefore, actual outcomes and results
may differ materially from what is expressed or implied in any
forward-looking statements. Detailed information about factors that may
affect the performance of CME Group may be found in its filings with
the Securities and Exchange Commission, including our most recent
Quarterly Report on Form 10-Q, which is available in the Investor
Relations section of the CME Group Web site. Additionally, the proposed
cross-investment and commercial arrangement transaction with BM&F
is subject to negotiation of definitive agreements, BM&F
shareholder approval, customary closing conditions and receipt of all
regulatory approvals and we cannot assure you that such agreements or
conditions will be satisfied. We undertake no obligation to publicly
update any forward-looking statements, whether as a result of new
information, future events or otherwise. CME-G
SOURCE: CME Group
CONTACT: Media, Allan Schoenberg, +1-312-930-8189, or Mary Haffenberg,
+1-312-930-3435, news@cmegroup.com, or Investors, John Peschier,
+1-312-930-8491, all of CME Group
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