Chicago-based exchange company
CME Group Inc.
) announced an agreement to introduce European futures market. To
realize this maneuver, the company has commenced a program to
test the platform's trading systems with prospective clients.
The launch of its London-based CME Europe venture is expected on
Sep 9, 2013 subject to approval from U.K. regulators. The initial
launch date was delayed by three months owing to the pending
approval from the Financial Conduct Authority, the new U.K.
The launch is planned to commence with currency futures
contracts. The initial launch will offer 30 contracts which will
include futures in denominations including euro, sterling, U.S.
dollar, yen, Swiss Franc, Canadian dollar and other currencies.
The new contracts might be denominated in European or Asian
Subsequently, contracts related to equities, interest rates and
commodity prices might also be introduced. New contracts would be
launched part by part as management is of the opinion that the
market at present would not be able to handle a host of new
This venture marks the company's first overseas exchange that
aims to cater to prospective European and Asian clients. For
clients who prefer to trade futures under the U.K. bankruptcy
regime over the U.S. market are expected to be facilitated
through the launch.
The planned acquisition of
NYSE Euronext Inc.
) invites staunch competition for CME. NYX and ICE already have
operations in Europe. Nevertheless, foraying into the European
futures market, CME now aims to take a share of the pie.
In the first quarter of 2013, revenues of the company declined
7.2% year over year to $718.6 million. Through the deal, CME aims
to improve its revenues through customer additions in U.K.
Through a likely successful launch of its European futures market
at the scheduled period, we expect CME to gain a significant
clientele base thereby enhancing revenues and in turn earnings
We project a long term earnings growth of 12.08% on the back
of sales growth of 6.05%. The Zacks Consensus Estimate for full
year 2013 is currently pegged at $3.12 representing a
year-over-year improvement of 3.02%.
CME currently carries a Zacks Rank #3 (Hold). Among others in
CBOE Holdings Inc.
) carries a favorable Zacks Rank #2 (Buy) and appears
CBOE HOLDINGS (CBOE): Free Stock Analysis
CME GROUP INC (CME): Free Stock Analysis
INTERCONTINENTL (ICE): Free Stock Analysis
NYSE EURONEXT (NYX): Free Stock Analysis
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