In an effort to provide customers additional benefits through
its over-the-counter ("OTC") facilities,
CME Group Inc.
) is making arrangements to offer "clearing services" for London
silver forward contracts, according to a Reuters report. On
receiving approval of the regulatory bodies, the program is
scheduled to start from August 5, followed by trading on the next
Experts opine that this initiative by the company follows the
sharp fall in trading volumes of silver traded in the exchange.
According to CME reports, silver futures volumes plunged 41% from
$12.02 billion during the first-half of 2012.
The fall in silver futures volume is in stark contrast to the
rise in trading volumes of gold and copper futures by 2.5% and 50%,
respectively. In addition, gold and copper are the most popularly
traded metals on the exchange.
CME Group's decision to launch the OTC clearing services comes
at a time when the commodities market is facing turbulence, owing
to the MF Global Holdings fiasco and mismanagement of "customers'
However, the demand for silver has been on the upswing following
the deterioration of the U.S. Dollar and other pressing issues
prevalent in the Middle East.
CME holds a 98% share of U.S. futures, trading with a clearing
house notional value of over $35 trillion. The company's launch of
metal contracts along with OTC interest rate swaps and
cross-margining between CME Clearing Europe and its U.S. clearing
house in the first half of 2012 has further accentuated its global
presence. Most of CME Group's long-term growth investments have
shown favorable upsides.
CME Group currently retains a Zacks #3 Rank, which translates
into a short-term Hold rating. It competes closely with
), which has a similar Zacks rank. We also maintain a
long-term Neutral rating on CME Group's shares.
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