Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2023 Defined Contribution East
    • 2023 ESG Investing
Breadcrumb
  1. Home
  2. Online
October 17, 2006 01:00 AM

Chicago Merc, CBOT to create world's largest derivatives exchange

  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    Chicago Mercantile Exchange Holdings Inc. today announced a merger with CBOT Holdings Inc., creating the world's largest global derivatives exchange. The combined company, to be named CME Group Inc., is valued at $25 billion, consisting of the CME's $18 billion and CBOT's $7 billion.

    Stockholders of CME and CBOT would own about 69% and 31% of the combined company, respectively, if no CBOT stockholder elects to receive cash in the deal. "CBOT stockholders will have the right to receive 0.3006 shares of CME Class A common stock per share of CBOT Class A common stock, or to elect an amount in cash per share equal to the value of the exchange ratio," subject to a $3 billion aggregate cash limit, according to a joint statement from the two exchanges.

    Terrence A. Duffy, CME chairman, will become chairman of the combined company; Charles P. Carey, CBOT chairman, will become vice chairman; Craig S. Donohue, CME chief executive, will become CEO; and Bernard W. Dan, chief executive at the CBOT, will serve as special adviser to the combined company for one year.

    The deal is expected to close in mid-2007, pending approval by shareholders of both companies and regulators.

    "(The merger) will be quite beneficial to institutional investors in the ability of the exchanges to achieve economies of scale in operations, product development and marketing," Joanne M. Hill, managing director and head of equity derivative strategies, Goldman Sachs, said in an interview.

    "Some of the efficiencies gained (from the merger) would be passed along to users," she added. "This (merger) has been something that people in derivatives always thought made a lot of sense but for legacy reasons thought to be too difficult to achieve. But exchange competition from outside the U.S. helped to make this (merger) happen.

    Richard A. Pike, president, RP Consulting Group, which provides derivatives consulting and risk monitoring services to institutional investors, said in an interview, "These two exchanges have been leaders in innovation and I don't expect anything to change there."

    CME Holdings biggest shareholders are Marsico Capital Management, which owns 13.64%, and Sands Capital Management, 5.52%; CBOT Holdings biggest shareholder is Caledonia (Private) Investments, which owns 6.5%, according to their latest proxy statements.

    The $217.5 billion California Public Employees' Retirement System, Sacramento, owns 0.5% of CME Holdings, according to Brad Pacheco, CalPERS spokesman.

    Steve Rodosky, executive vice president-portfolio management at PIMCO, said in an interview: "I think the biggest benefit we'll see in the long run is a lot of strategies that rely on cross-exchange trading — such as Treasury futures (on the CBOT) and an offsetting position in eurodollar futures (on the CME) — incur bid/ask spreads on both pieces. I think they will start offering a lot of these cross strategies as bundled. That should narrow bid/ask spreads.

    "The risk as I see it is that these electronic platforms … will face capacity issues, when markets get real volatile and busy. So much information is coming out of these systems, there are brief periods where it shuts down; open outcry trading continues. Once they start to offer all contracts on a single platform, their capacity constraints will be more exposed. That is a technical issue they will have to deal with."

    Recommended for You
    martin_luther_king_day_generic_i.jpg
    No P&I Daily on Martin Luther King Jr. Day
    Closed sign
    No P&I Daily over the holidays
    Happy_Thanksgiving_i.jpg
    No P&I Daily for Thanksgiving holiday
    The Institutional Investor's Guide to ESG Investing
    Sponsored Content: The Institutional Investor's Guide to ESG Investing

    Reader Poll

    January 25, 2023
    SEE MORE POLLS >
    Sponsored
    White Papers
    Show Me the Income: Discovering plan sponsor and participant preferences for cr…
    Morningstar Indexes' Annual ESG Risk/Return Analysis
    The Future of Infrastructure: Building a Better Tomorrow
    Outlook 2023: Opportunity in a volatile world
    Research for Institutional Money Management
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    December 12, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2023 Defined Contribution East
      • 2023 ESG Investing