Software // Information Management
04:27 PM

CME Group Confirms $11 Billion Offer For NYMEX Futures Exchange

Officials report discussions are in the "early stages" but the exchanges share common trading technology, which could ease integration.

Under a deal that would put two of the world's largest electronic futures exchanges under one roof, CME Group of Chicago on Monday said it has offered $11 billion to purchase NYMEX Holdings.

Under the proposal, CME is offering NYMEX shareholders $36 and .1323 of a share of its common stock for each NYMEX share held.

CME said in a statement that its discussions with NYMEX officials are in their "early stages" and that an agreement is not certain. It added, however, that it would maintain NYMEX trading floors in the New York City area if the deal goes through.

CME has a history of aggressive acquisitions. In 2006 it bolstered its presence in the Midwest futures markets through an $8 billion merger with the Chicago Board of Trade. The deal combined CBOT with CME's Chicago Mercantile Exchange.

NYMEX operates the New York Mercantile Exchange and the New York Commodities Exchange, which deal primarily in futures markets for physical goods and commodities -- including oil, coffee, silver and gold. Last year, NYMEX also began trading in carbon credits.

The NYMEX has long been a New York institution. It traces its roots to 1872, when a group of farmers founded the Butter and Cheese Exchange of New York. For decades, commodities were bought and sold at live auctions.

Of late, however, futures exchanges have relied on increasingly sophisticated technology to facilitate around the clock, global trading in real time.

NYMEX averages more than 1.5 million transactions per day. In 2006, it migrated its energy trading and options contracts business to CME's Globex electronic trading platform.

Earlier this month, CME announced a major technology upgrade for Globex. In tests, the enhanced system -- slated for a first quarter rollout -- reduced response time for electronic trades from 31 milliseconds to about 16 milliseconds.

With CME and NYMEX already sharing a common trading infrastructure for key parts of their businesses, any merger between the two should be that much easier to consummate.

Shares of NYMEX were up 8.7% in Monday afternoon trading to $116.45, while CME shares were off 1.3% to $620.90.

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