Under the supervision of the Chicago Board of Trade ("CBOT"),
Chicago Mercantile Exchange
) has decided to start trading Short-Dated New Crop Options on CBOT
Corn and Soybeans futures from June 4, 2012. However, the new
options will be listed for trading on CBOT wheat futures starting
September 4, 2012.
For Short-Dated New Crop Options on CBOT Corn and Soybeans
futures contracts will be listed in May, July, and September.
Short-Dated New Crop Options on CBOT Wheat futures will be listed
in December, March, and May. These will be listed for trading on
the CME Globex.
The Short-Dated New Crop Options is similar to CME Group's other
liquid agricultural options. These are inclusive of the recently
listed MGEX-CBOT Wheat Spread Options, standard or serial options,
weekly options, calendar and other spread options.
This being the growing season, CME Group believes that the
company will benefit from the increasing consumer demand for
options to manage risk. Simultaneously, the commercial grain
customers will reap the benefits of relatively lower pricing to
offer their producers contracts at a reduced rate.
Challenging CME Group's dominant agricultural market position,
) announced the launch of the trading of corn, wheat, soybeans,
soymeal, soyoil and oilseed futures. The company has come up with
around-the-clock trading, starting with Corn at a very low-margin
at the same price level as the CME Group.
In a bid to grab a portion of CME Group's market share,
IntercontinentalExchange also competed against CME Group for the
U.S. WTI oil contract, threatening to cannibalize its profit share
as well. IntercontinentalExchange has also performed well in sugar,
cocoa and canola futures. However, it has still a long way to go
before standing at par with CME Group. Recently, its wheat and
barley contracts failed to succeed in the Canadian Wheat Board's
Consistent growth over the past four years is a positive for CME
Group but mounting competitive pressure from
IntercontinentalExchange will likely take a toll on the company.
The company's diverse product range contributes to an increase in
overall trading volume but simultaneously, it is significantly
exposed to extreme interest rate volatility, firm government
regulations and limited credit availability in the current unstable
capital and credit markets, which can hamper liquidity and lead to
a decline in the customer demand lest this trade scenario continues
or worsens in future.
The trading activity is inherently variable, both seasonally and
cyclically, whereas many of CME Group's costs are fixed. But the
operating leverage is a key positive for the company.
We maintain a long-term 'Neutral' recommendation on the stock.
The company currently retains a Zacks #4 Rank, which translates
into a short-term Sell rating.
CME GROUP INC (CME): Free Stock Analysis Report
INTERCONTINENTL (ICE): Free Stock Analysis
To read this article on Zacks.com click here.