CME Group CEO to retire

CME Group Inc. Chief Executive Phupinder S. Gill, who has pushed the world’s largest futures-exchange operator into new markets in Europe and Asia since assuming the job in 2012, intends to retire Dec. 31.

A CME spokeswoman said Mr. Gill, 56 years old, informed the board this week of his decision to retire early. His employment contract had been set to run to 2019.

Following CME’s tradition of promoting within the firm, Terrence A. Duffy, currently executive chairman and president, will retain the chairman title while adding the CEO job as well. Chief Commercial Officer Bryan T. Durkin will become president.

CME Group: Duffy says he would have no choice but to move CME if tax passes

(Bloomberg)—A proposal for Illinois to tax trades on exchanges in the state is “ridiculous,” according to the executive chairman of Chicago-based market operator CME Group Inc.

The suggested levy—which would charge $1 or $2 per contract, depending on the product—would make many transactions uneconomic, forcing the exchange to leave the state because customers would stop buying and selling, CME Chairman Terry Duffy said. The bill, designed to increase revenue in the financially troubled state, is in early stages and faces long odds of approval.

CME has the flexibility to leave the state, skirting the tax. Earlier this year, it sold its main data center outside Chicago to CyrusOne Inc. Much of CME's business is conducted there electronically, not in old-school trading pits, so the exchange could simply shift to a data center located outside Illinois. Other facilities “would welcome me with open arms,” Duffy said.

Duffy said CME doesn't allow spoofing, a form of manipulation, and has technology designed to detect the practice. “We've never, ever supported anybody spoofing in our marketplace,” he said.

The U.S. government has accused futures trader Igor Oystacher of spoofing on markets including CME's. Oystacher's former business partner, Edwin Johnson, has said in a court filing that Duffy was among those who gave “false assurances” that “Oystacher's trading practices were legal and legitimate” -- something CME has previously denied.

Executive pay : CME Group

CME Group's board this week approved new employment contracts with Executive Chairman and President Terry Duffy and CEO Phupinder Gill, boosting their compensation and extending the terms of their employment for years.

The base annual salary for Duffy, 57, will jump 20 percent next year to $1.5 million, from $1.25 million, according to his new contract signed yesterday and disclosed today in a filing with the Securities and Exchange Commission. He'll also be eligible for an annual bonus of one-and-half times that pay plus three times that amount in the form of a stock award.

CME Group CEO Phupinder Gill

The base annual salary for Gill, 55, will jump 25 percent next year to $1.25 million, from $1 million, according to the contract signed yesterday and disclosed today in a filing with the Securities and Exchange Commission. He'll also be eligible for an annual bonus of one-and-half times that salary amount plus two-and-a-half times that amount in the form of a stock award.

Last year, Duffy had total compensation of $6.66 million and Gill had total compensation of $5.37 million

CME halts trading of some contracts on Tue April 8, 2014

(Bloomberg) — CME Group Inc., the world's largest futures market, said “technical issues” prompted it to halt trading of about two dozen contracts on its Globex futures and options markets, according to a notice on its website.

The halted contracts include corn, wheat, cattle and hogs, Chicago-based CME Group said. The exchange owner posted the notice at 12:51 p.m. Its largest revenue-producing contracts include futures on interest rates, equity indexes, currencies and energy products. None of those were affected.

“We are working on a resolution and will make an announcement when the problem has been corrected,” CME Group spokesman Chris Grams said in a telephone interview today.

American markets have experienced a series of computer errors in the past year. The U.S. equity derivatives market was halted briefly Sept. 16 because of an issue with data from Opra, while the Chicago Board Options Exchange stopped trading three days earlier on its C2 venue when it couldn't send information to the price processor. On Aug. 22, trading in thousands of stocks listed on the Nasdaq Stock Market was frozen for three hours by a data-feed error.

The CME Group malfunction comes at a time of rising scrutiny of American market structure after publication of Michael Lewis's book “Flash Boys.”

GRAIN TRADING

Breakdowns at exchanges around the world could threaten industry credit ratings, Standard & Poor's said in September.

U.S. Securities and Exchange Commission Chairman Mary Jo White ordered stock exchanges on Sept. 12 to bolster systems to prevent malfunctions.

Trading in the CME contracts today was halted before the close of grain trading at 1:15 p.m. Corn and wheat contracts normally don't trade again until 7 p.m. local time, while hog and cattle futures continue to trade electronically until 4 p.m. after the floor close at 1 p.m.

Grain futures and options contracts will be settled today using the “open outcry methodology,” Laurie Bischel, a spokeswoman for CME Group, said in an e-mail.

“Any orders we needed to execute were done in the trading pits on the floor,” Dan Anderson, a grain broker and analyst for ED&F Man Capital LLC in Chicago, said in a telephone interview. “It was old-school order entry.”

'BIG MESS'

The trading halt “created a big mess,” said Dennis Smith, a senior account executive at Archer Financial Services Inc. in Chicago, who was trying to sell corn contracts when the system went down. He said he called down to the pit to get his orders executed. “It was a real headache. It just created a whole bunch of confusion,” he said.

“It definitely slowed things down,” Sterling Smith, a futures specialist at Citigroup Inc. in Chicago, said in a telephone interview. “A great preponderance of the business goes over electronically, and when the electronic part of business stops, there's an initial shock. It definitely hampers trading and hurts volume.”

Executive pay : CME boosts pay for Gill by 28%, for Duffy by 30%

CME Group Inc. increased compensation for its top two executives more than 25 percent last year — a bigger boost than the Chicago-based futures exchange company delivered to public shareholders in earnings, revenue or trading volume increases.

CME, which operates the largest futures marketplace in the world, said in a proxy filing with the Securities and Exchange Commission that total compensation for CEO Phupinder Gill jumped 28 percent to $4.15 million last year compared with 2012, including a near doubling of his bonus to $1.1 million. His pay package also included stock awards worth $1.9 million, the filing said.

Compensation for Executive Chairman and President Terry Duffy climbed 30 percent to $5.22 million, also including a near doubling of his bonus to $1.4 million.

The company's earnings last year rose too, albeit at a smaller rate. Net income climbed 7.9 percent to $978.1 million over 2012, on a revenue jump of less than 1 percent to $2.94 billion. Shares rose 55 percent last year over 2012 to close out the year at $78.46 a share.

Mr. Gill was appointed to the top post in 2012, after the exit of Craig Donohue. At the time, the company and the industry were still reeling from the 2011 collapse of MF Global Inc., a futures broker that abruptly filed for bankruptcy and revealed that as much as $1.6 billion in customer funds was missing. The incident undercut customers' trust in the futures market, and industry volume declined. Volume has since largely recovered, with average daily trading volume increasing 10 percent last year over 2012.

CME plans rival aluminum contract

(Reuters) — CME Group Inc. plans to launch a physically deliverable aluminum futures contract that could compete with the London Metal Exchange's $54 billion market, the latest sign that the years-long crisis over warehousing has emboldened rivals.

Harriet Hunnable, managing director of metals at CME Group, confirmed plans to move onto LME turf at a media briefing on Tuesday.

"Customers want a viable alternative to other exchange contracts on offer today," she said, adding progress on launching the contract was "very developed" and it would start in the United States.
"They want a physically deliverable contract in warehouse, and they want transparency that only CME can offer," she added.

The exchange has been quietly canvassing producers, traders and end-users on launching a competing contract for the past year.

The timing may be right as its London rival is under fire from end users such as MillerCoors LLC and Coca-Cola Co who use the metal for aluminum cans and are angry at its handling of warehousing policy.
Long wait times and incentives paid by warehouse operators, owned by Wall Street banks and big merchants, have distorted supplies and inflated physical prices even as the market is awash with an estimated 10-million tonne surplus, they say.

U.S., British and European regulators are now probing the issue and the exchange, Goldman Sachs Group Inc and Glencore Xstrata PLC are among those targeted in a series of class-action lawsuits.
The LME's new owners have announced a series of measures aimed at curbing wait times for users to take delivery of metal, placating the anger and protecting its stronghold in the global base metals market. But a coalition of aluminum users have said the measures don't go far enough.

TOUGH MARKET
But it may be even harder for CME to lure money away from a deeply entrenched benchmark, which took some seven years to win over producers after its launch in 1978.

There are very few examples of upstart commodity contracts dislodging a critical portion of liquidity from an established market.

The New York Mercantile Exchange (NYMEX), now owned by CME, struggled for 10 years to gain traction with a North American aluminum contract before being delisted in 2009. It was unable to lure established users away from London.

"It's a great time if they can ever pull it off," said a U.S. trader who has held discussions with the CME on its plans.

"But in reality what killed (the NYMEX contract) was nobody priced on it. I don't know how a contract survives if nobody prices off it," he said.

There are no other contracts to rival London's dominance.

The Shanghai Futures Exchange's (SHFE) aluminum contract accounted for just 1.1 percent of the combined LME/SHFE futures volumes traded in the first eight months of the year, according to Reuters calculations. The Chinese exchange is closed to many outside investors.

Market participants favor a physically deliverable contract, but stress that the exchange must also establish a warehousing policy that would prevent metal getting stuck in queues, market participants have said.
"They need to have a viable warehouse system so producers can deliver to it. Without it, there's no other game in town," said one industrial user.

In the United States, its COMEX copper contract has carved out a bigger share of the global copper futures trade, partly due to its monthly date structure which is popular with hedge funds and U.S. indices.
Some investors have also increasingly played the arbitrage between the London and the New York markets, further boosting trading volumes, traders said. Warehouses in the seven locations in its copper storage network have no queues.

CME delays start of London exchange for second time

(Reuters) — CME Group Inc., the No. 1 U.S. futures market operator, is again postponing the start of operations in London, its first exchange abroad, due to a technical problem, it said on Friday.
It did not provide a new date.

The 165-year-old exchange is trying to better compete with European rivals such as Germany-based exchange Eurex.

"This notice is to advise you that the launch date for CME Europe Ltd. of 29th September has been delayed due to a technical issue around the delivery of physical currencies," the CME told customers in a memo seen by Reuters.

CME, which owns the Chicago Mercantile Exchange, the Chicago Board of Trade and the New York Mercantile Exchange, had already postponed the launch of London-based CME Europe Ltd to Sept. 29, for a trade date of Sept. 30, from Sept. 9.

CME plans to offer 30 foreign-exchange as well as options and commodities contracts. Outlining the timeframe for non-currency products for the first time, CME Europe's CEO Robert Ray said it plans to offer options within two months of launching and bring in commodities by the third quarter of 2014.

The exchange will continue to use the Libor interbank lending rate as a basis for its derivatives contracts despite rigging scandals which have undermined trust in the benchmark.

"Nobody can ditch it. Despite the hyperbole, just look at the number of mortgages and loans out there linked to libor," said Ray on the sidelines of a conference in Geneva this week.

Britain has put in place new reforms to tighten how Libor is run and top U.S. regulator CFTC has called for reform to the benchmark at a global level.

"We will just have to work with a different methodology going forward," he said, referring to the reforms.

CME delays launch of London exchange

(Reuters) — CME Group Inc., the biggest U.S. futures market operator, told customers today its first exchange abroad will not open next week as planned.

The company postponed the launch of London-based CME Europe Ltd. to Sept. 29, for a trade date of Sept. 30, from Sept. 9, according to a memo to customers.

"We are currently working very closely with regulators in order to achieve both recognition and a successful CME Europe launch," CME said in the notice.

CME told customers that it will provide "a further update to the timetable of the launch in the coming weeks and will keep you informed of any announcements regarding the regulatory recognition process."
CME spokesman Allan Schoenberg declined to comment beyond the notice.

CME, which owns the Chicago Mercantile Exchange, the Chicago Board of Trade and the New York Mercantile Exchange, has applied to the U.K.'s Financial Conduct Authority for approval to open the London-based market. It is set to offer 30 foreign-exchange futures products, according to CME's website.
Chris Hamilton, a spokesman for the Financial Conduct Authority, declined to comment.

CME has stakes in several foreign exchanges, including in Brazil and Dubai, but London would be its first solo run in an overseas market.

CME's chief executive officer, Malaysia-born Phupinder Gill, took the reins of the Chicago-based company last year, vowing an international perspective for the 165-year-old U.S. futures powerhouse.

CME's volume falls 40% in August

(Crain's) — CME Group Inc.'s August volume declined 40 percent compared with the same month last year as low interest rates and recent market debacles carved into futures trading.

As a result, analysts have recently reduced their expectations for third-quarter earnings at Chicago-based CME, which makes money on fees every time a futures contract is traded. CME is the largest futures exchange in the world.

“CME reported official August metrics this morning that pointed to a significant slowdown in activity,” New York-based UBS analyst Alex Kramm said in a report this morning, noting that the August decline was both on a year-over-year basis and compared with July.

Volatility in the markets last August, mainly as a result of financial turmoil in the European Union countries, contributed to record futures trading at the exchange last year, but since then, investor confidence has been beaten down by a series of broker calamities, such as the recent fraud at Peregrine Financial Inc., and technology snafus, including market-maker Knight Capital Group Inc.'s slew of unintended orders that nearly destroyed the company with a $440 million loss.

CME has said that the stable, low-interest-rate environment is driving down demand for futures trading in that area. The exchange has also acknowledged that the loss of futures-trading customer money in the Peregrine and MF Global Inc. collapses has also sapped interest. While CME hasn't been directly involved in the missteps, its customers have suffered and investors have questioned the industry's regulatory framework. The company didn't immediately have any additional comment today.

The CME volume declines occurred in most contract types, with a 41 percent drop in interest rate contract trading and a 58 percent decline in equity index contracts. The exception was in agricultural commodity contracts, where there was a 2 percent rise. Open outcry trading fell more than the electronic trading and was less than half the volume last year.

The company recently cut some Chicago jobs as part of an effort to contain costs in the face of lower revenue. For the first half of the year, CME's profit dropped 31 percent to $519.7 million, on a revenue decline of 6 percent to $1.57 billion.

Mr. Kramm lowered his third-quarter earnings estimate for CME to 66 cents a share, from 71 cents a share, compared with an analyst consensus of 73 cents, according to the report. Mr. Kramm also noted that CME's revenue per contract, which varies depending on the type of contract, also “declined slightly” for the three months ending in July from the prior three-month period.

New York-based Sandler O'Neill & Partners analyst Richard Repetto lowered his third-quarter estimates on Aug. 29 in anticipation of the weak volume results, dropping his expectation to 70 cents. He noted that August open interest at the exchange, or the dollar value of trading, also sank about 16 percent.

Mr. Kramm noted that there are “revenue opportunities” for CME as a result of new regulations on over-the-counter derivatives. Specifically, regulators are seeking to have swaps publicly cleared and CME has positioned itself to grab some of that business.

CME Plans New European Exchange

LONDON—The Chicago Mercantile Exchange Group, the world's biggest bourse by market capitalization, plans to establish a fully fledged European derivatives exchange and will submit its license application to the U.K.'s Financial Services Authority "within days," according to two people familiar with the matter.

The CME's move to create a U.K.-regulated exchange forms part of its aggressive plan to expand beyond its home market and comes as the world's biggest bourses review their global strategies. 

The new multi-asset exchange, which is expected to launch in the second quarter of next year, according to the sources, sees the CME follow its domestic rival IntercontinentalExchange into the European derivatives market and will bring it into direct competition with NYSE Liffe. 

The recognized investment exchange license, under which exchanges must operate in the U.K., is likely to be the sixth-ever issued by the FSA and the only one issued in the past five years. 

In 2009, the 114-year-old CME—which has had a small presence in London since 1979—embarked upon an aggressive push into Europe, the Middle East and Asia. In the past four years, the company has relocated its metals team to London, launched CME Clearing Europe and acquired a 50% stake in the Dubai Mercantile Exchange. 

Although the CME has partnered with other foreign exchanges to develop its product base and global presence, this will be the first time it has single-handedly launched a brand new exchange beyond the U.S.

The CME had been mulling the creation of a European bourse for some time, one person familiar with the matter said, but its plans were put on ice when a bidding war erupted for the London Metal Exchange a year ago. Acquiring the LME would have resulted in the CME obtaining a U.K. derivatives exchange license, but the CME was unwilling to match the £1.39 billion ($2.12 billion) that the Hong Kong Exchanges & Clearing 0388.HK +2.83% subsequently agreed to pay for the LME in June. 

The world's biggest exchanges are reviewing their global strategies after a string of failed mergers in the sector. The CME's move to apply for a U.K. license underlines the importance of creating a locally regulated entity offering regional products when expanding internationally. Although traders across the globe can connect to the CME's U.S.-regulated electronic-futures platform Globex, many trading firms prefer to operate on a regional basis under local rules. 

One person familiar with CME's plans said: "By creating a European exchange, members of the CME will be able to trade regionally relevant contracts, denominated in local currencies, in relevant time zones, with the potential for margin efficiencies when clearing their contracts."

Website: www.efinancialnews.com

Chicago ommunity groups to protest CME

Chicago protesters are gearing up for a series of marches and rallies targeting CME Group Inc.'s annual meeting Wednesday, arguing that the company's recent state tax reduction deprives taxpayers of social services.

The Stand Up! Chicago coalition of labor, community and social justice organizations, plans to stage a rally with senior citizens and people with disabilities outside the company's Chicago Board of Trade in the morning, gather for a march around the Thompson Center at about midday and march to CME headquarters in time for the 3:30 p.m. meeting, the group said in a news release.

Some protesters may be willing to be arrested and people associated with the protesters may attend the meeting to speak up during the question-and-answer period, said Catherine Murrell, a spokeswoman for the coalition. In anticipation of the protest activity, CME has increased security at its building.

CME's bid for London Metal Exchange falls short

(Crain's) — CME Group Inc., the world's largest futures-trading company, was bested in its bid to purchase London Metal Exchange Ltd. as rival bidders drove the price above its offer, according to sources familiar with the auction.

CME last week offered to pay 1.2 billion British pounds — about $1.9 billion — to buy LME, but Hong Kong Exchanges & Clearing Ltd. is willing to pay 2 billion pounds or more, according to the sources. CME's exit from the bidding leaves Hong Kong Exchanges to battle one other remaining bidder, IntercontinentalExchange Inc.

A CME spokesman declined to comment. A spokesperson for the Hong Kong Exchange didn’t immediately respond to a request for comment.

CME will miss out on the global growth opportunity at a time when its trading volumes have declined, and it could see LME wind up in the hands of its archrival, Atlanta-based IntercontinentalExchange, also known as ICE.

Still, CME also won't end up paying too much for an exchange that has yet to move into the modern era of electronic trading.

“You're always concerned, as a shareholder, how much is ultimately paid,” said Jim Ginsburg, managing partner of Chicago-based Vernon & Park Capital L.P., which owns CME stock. “Sometimes the winners of auctions ultimately turn out to be the losers.”

LME would have been a nice fit for CME. The Chicago exchange already dominates futures trading in precious metals, including gold and silver. LME operates the world's biggest exchange for industrial metals, such as platinum and copper.

While CME could still start its own trading of industrial metals contracts, it's difficult to build a market from scratch. It purchased its other New York-based metals exchanges, Nymex and Comex.

“There's nothing to stop them from launching those metals on their own,” said New York-based Evercore analyst Chris Allen. “The question is whether you can build the liquidity or not.”

Meanwhile, trading volume at CME has declined every month this year through April, compared with last year.

ICE, the second-biggest U.S. futures exchange company, has been a tough competitor in energy-related contracts, and just this month tried to drive harder into the grain markets by extending its hours of trading. CME responded quickly with an extension of its own hours. A spokeswoman for ICE declined to comment.

“Certainly there's a risk that anybody who acquires the LME can become the dominant player in the metals arena,” Mr. Ginsburg said. “They're a major player, and how does that play out on somebody else's platform?”

LME still operates its exchange mainly by way of floor trading, as opposed to electronic trading, and keeps a network of warehouses for possible physical delivery of the commodities traded on its exchange.

In an update today, LME said it had narrowed the field of potential buyers to two, though it has said that it may not sell the exchange at all. Ultimately, three-quarters of its owner-members must approve any deal, and some have been loath to leave behind their traditional way of trading.

LME said in the update that it's seeking a “detailed understanding” of the remaining bidders' “plans for the future governance and operation of the market and the deliverability of their respective proposals, as well as the value offered.”

The silver lining for CME shareholders may be that the company increases a special dividend payout next year. The company initiated an “annual variable dividend” this year of $3 per share, in addition to its regular dividend, and said the new annual dividend would fluctuate in the future depending on, among other things, the amount of capital spent on acquisitions.

Keefe Bruyette & Woods analyst Niamh Alexander said in a research note today that she believes CME being out of the bidding for LME “increases the likelihood” of another annual dividend next year of at least the same size.

Separately, CME announced today that it has hired Susan Schultz to the newly created position of executive director and counsel to the executive chairman and president. Terry Duffy is currently the executive chairman and president. She was most recently a deputy general counsel and chief operating officer for the LCA division of Newedge USA LLC.

The company also hired Linda Rich as senior managing director of government relations and legislative affairs. She was most recently the senior vice president for government relations at rival exchange operator NYSE Euronext.

CME in talks to enter China derivatives market

(Reuters) — CME Group Inc., operator of the world's leading energy, grains and precious metals markets, is in talks with China's securities regulator to enter the mainland's financial derivatives market, the official China Daily reported on Thursday.

CME President Phupinder Gill told the newspaper that the group was in talks with the China Securities Regulatory Commission (CSRC) about starting a pilot overseas futures trading business that would allow some futures companies from China to buy and sell futures on the Chicago-based international exchange.

CME Group operates the Chicago Mercantile Exchange, the Chicago Board of Trade and the New York Mercantile Exchange.

"Everything is going well so far, and that will be a milestone for CME's global expansion process," Gill was quoted as telling the paper.

China closed offshore futures trading 17 years ago because of heavy speculative trade, but Gill was hoping that would change, the report said.

"During the last decade I have seen China's derivatives markets successfully shake off early challenges. The domestic regulatory institutions and exchanges have improved risk management capacity a lot, which has reached world-class," he was quoted as saying in the report.

Gill said China's exchanges in Dalian, Shanghai and Zhengzhou were "very well-managed" and that China's growth had fuelled the global economy over the past few years.

The firm was also planning to launch a clearing house in Asia and increase the number of employees in the region, the China Daily said.

In October, CME Group said about a fifth of its business came from outside North America and that it aimed to boost that figure, not through acquisitions but by expanding sales of existing products.

The opening of the Chicago Mercantile Exchange’s Gold contract on December 31, 1974

The opening of the Chicago Mercantile Exchange’s Gold contract on December 31, 1974

Illinois could lose $100 million in CME/CBOE deal

As the Illinois Senate prepares to act on a proposed tax break to keep CME Group Inc. and CBOE Holdings Inc. in town, the price to the cash-short Illinois treasury is becoming clearer: at least $90 million, and by some accounts even more.

The pending bill, sponsored by Senate President John Cullerton, stalled yesterday but could come up for a vote when the Senate Executive Committee meets at 3 p.m. Tuesday. Senate Republicans weren't yet behind the measure, but it's hard to see them staying off very long.

Mr. Cullerton may well need GOP votes, because the cost of cutting the corporate-income tax for the two highly profitable companies could be a tough sell to Democratic lawmakers who have been busily cutting state services that affect their constituents.

Mr. Cullerton's office says the break would save CME $60 million and CBOE around $6 million. In addition, to lure Downstate votes, the measure also contains a clause that would revive the recently expired corporate tax break for research and development, costing another $25 million to $30 million or so.

Chicago: Cullerton's measure to cut CME, CBOE taxes hits bump

(Crain's) — A plan to cut state income taxes on Chicago’s big trading exchanges hit a bump late Monday when Illinois Senate President John Cullerton abruptly cancelled a vote on a bill he’d submitted earlier in the day to slash their tax liability 50% and perhaps more.

The bill, introduced Monday morning by Mr. Cullerton, had been scheduled for a vote in the normally compliant Senate Executive Committee. The measure specifically would help CME Group Inc., and CBOE Holdings Inc., both of which have threatened to move some operations out of state because of allegedly unfair Illinois taxes.

But Mr. Cullerton Monday evening postponed any vote. His spokeswoman said there was a need to “tweak the bill” and “tighten some language” — both in regard to the exchanges and to a separate clause in the bill that would revive the state’s recently expired corporate research-and-development tax credit for five years.

The R&D clause had been added as an apparent sweetener to get non-Chicago lawmakers to vote for the bill.

It was not known whether a vote also was held up because initial reaction to the proposal was poor, but Senate Republicans withheld support, at least for the moment. Their spokeswoman said the caucus appreciates the CME's and CBOE's problems but was shown the bill only an hour before it was introduced.

But, shortly after the bill was submitted, House Majority Leader Barbara Flynn Currie suggested that the bill may not be needed at all, and certainly needs full vetting.

“I’d like to see the details,” said Ms. Currie, like Mr. Cullerton a Chicago Democrat. “If there is an essential unfairness (in current state corporate income-tax law), I’d like to end it. But I don’t know if there is an essential unfairness.”

House Speaker Michael Madigan has recused himself on any CME legislation, making Ms. Currie the senior House Democrat on this measure.

Mr. Cullerton's office said both CME and CBOE would get a 50% cut "as currently drafted," but added, "Things are changing." Other Springfield sources said they weren’t sure exactly what the savings would be.

As introduced, both exchanges generally would pay state corporate income tax only on 27.54% of receipts from transactions “matched or executed by means of an electronic transaction system.” Such trades represent the vast bulk of CME and CBOE's transactions.

A minority of trades — those attributable to the traditional “open outcry” system on exchange floors — would be 100% taxable in Illinois, if they occurred in Illinois. But such trades make up a relatively small share of the exchanges' overall business, and much of the CME's open outcry trades occur at its New York Mercantile Exchange unit in New York.

Both Gov. Pat Quinn and House Democrats have been supportive of the idea of helping the exchanges, but it was not immediately clear if they are endorsing Mr. Cullerton's bill.

"We’re reviewing the proposal,” a spokeswoman for the governor's office said Monday evening.

The exchanges have loudly complained in recent months that they paid a disproportionate share of the state’s corporate income taxes, because almost all of their income was attributed to Illinois sales despite their world-wide customer base. Other states reportedly have made significant financial offers to the exchanges to get them to move their headquarters out of Illinois.

McGraw-Hill, CME in index joint-venture talks

McGraw-Hill Cos. (MHP) is in advanced talks to combine its S&P Indices business with CME Group Inc.'s (CME) Dow Jones Indexes, according to a report published in the online version of The Wall Street Journal late Thursday.

If a deal is completed, a joint venture will house well-known indicators including the S&P 500 Index SPX and the Dow Jones Industrial Average DJIA . McGraw-Hill would manage the joint venture and be its largest stakeholder, according to the report, citing people familiar with the matter.

CME owns 90% of the Dow Jones Indexes through a joint venture with Dow Jones & Co. CME would have a minority stake of about 25%, while Dow Jones could have a minimal stake. Dow Jones is a unit of News Corp. (NWS)

CME faces direct challenge from NYSE launch

(Reuters) — NYSE Euronext will launch its long-awaited challenge to CME Group Inc.'s lucrative Treasury futures franchise on March 21, it said on Wednesday.

The launch highlights the importance of the derivatives business to the operator of the world's best known stock exchange, which agreed last month to be taken over by Germany's Deutsche Boerse. The combination would dominate European futures trading, even as NYSE tries to win a foothold in U.S futures, where CME is the biggest player.

Regardless of the ultimate winner in the U.S. market for rates futures, it is already clear the battle could dramatically pare traders' costs.

NYSE's co-owned clearinghouse, New York Portfolio Clearing, will use a cross-margining arrangement with its co-parent, the Depository Trust and Clearing Corp, to slash costs for traders who buy and sell in the cash and the futures market at the same time.

CME, whose Chicago Board of Trade and Chicago Mercantile Exchange units have dominated interest-rate futures since they invented them decades ago, is maneuvering to keep its franchise. On Monday, it put forth a plan to offer cross-margining and save traders money.

CBOT has successfully fended off several challenges to its interest-rate futures business over the years.

CME might pursue NYSE to stave off competitive threat

(Crain's) — CME Group Inc. is not commenting on reports that it might make a hostile counteroffer for NYSE Euronext, but the Chicago-based futures exchange has compelling reasons to keep the Big Board out of the hands of Deutsche Borse, if it can.

A Deutsche Borse-NYSE Euronext combination, which reports said could be announced Tuesday, would be a huge threat to CME. In a business where trading volume drives costs down and profits up, the CME handles 97% of U.S. futures trading, but it would be overshadowed globally by the combination of Europe’s two largest futures exchanges, NYSE Liffe and Deutsche Borse’s Eurex.

CME traded about 3 billion futures contracts last year, while NYSE Euronext and Eurex markets traded a combined 4.8 billion.

"Anything's possible," said Paul Zubulake, senior analyst for futures and options at Aite Group LLC, a financial services market research firm in Boston. "Would it make sense? Sure."

“We don’t comment on rumors or speculation,” a CME spokesman said. Reports on Fox Business News and financial news website theflyonthewall.com suggested CME might make a joint effort with Nasdaq OMX Group to bid for NYSE Euronext.

A tie-up with Deutsche Borse would add strength to NYSE Liffe’s plan to go head-to-head this year with CME in some of its biggest contracts, such as eurodollar and interest-rate futures.

While CME recently won approval for a London-based clearinghouse to help attack the European market, NYSE Liffe plans to launch a clearinghouse in New York for Treasury futures, one of CME’s biggest strengths. NYSE Liffe has teamed up with New York’s Depository Trust and Clearing Corp., which handles trillions of dollars in bond transactions in the cash market.

The ability to trade cash and futures markets in bonds on the same electronic trading platform could provide fast-moving opportunities to play one market off the other at a lower overall cost, creating stiff competition for CME.

“They are concerned about that joint effort,” said Mr. Zubulake. While he has no knowledge of a hostile CME bid for NYSE Euronext, “it makes sense from a big, big, big picture.”

CME sees 3 senior employees resign in Asia

(Reuters) — Three senior staff of the CME Group in Asia have resigned since the start of the month, even as the exchange said on Wednesday it remained committed to its expansion plans in the region.

The three — Asia managing director C. F. Wong, head of energy George Ng and associate director Sam Ho — are leaving for personal reasons, three industry sources told Reuters.

Jeremy Hughes, spokesman for the CME Group, which owns the New York Mercantile Exchange (NYMEX) where the benchmark West Texas Intermediate (WTI) crude oil is traded, confirmed the three resignations.

"The CME Group remains committed to our clients in Asia, and growing our business in the region continues to be a large part of our growth strategy," he said.

"Our Singapore office is growing to about 30 employees, and we remain very much committed to serving our clients in the region and to growing our business throughout Asia."

In the past two years, the CME Group has grown both trading and clearing volumes on its Globex and Clearport platforms respectively during Asian trading hours, particularly after its acquisition of the New York Mercantile Exchange in 2008. For example, clearing volumes for oil more than doubled during Asian hours.

The growth, in part, was boosted by the global financial crisis in the second half of 2008 when the Asian oil trading community, concerned by counterparty risks following the collapse of Lehman Brothers, moved away from bilateral trades into clearing.

The spokesman said Wong, who submitted his resignation last week, will be assisting the CME Group to transition his duties over the next several months.

Ho resigned early this month and is serving gardening leave, while Ng quit last week and is serving notice.

The CME Group has grown from five employees about two years ago to the current 30 and plans to expand further, the sources said.

The departures are expected to disrupt those plans in the short term but all three headcounts are expected to be replaced eventually, the sources added.