Some thoughts of my thoughts on the CBOT IPO. -Uses Euronext Liffe's LIFFECONNECT for matching, not its own system -In 2003, Exchange fees accounted for 75% of revenue ($285mm); 2004, only 54% of revenue ($204mm) -Uses CME's CME/CBOT Common Clearing Link for clearinghouse -Clearinghouse fees increased from $1.158mm in 2003 to $73.556mm in 2004. -Clearinghouse house costs increased from $972m in 2003 to $54.755mm in 2004. -82% of all contracts cleared are for Financial derivatives ⦠-CME is the largest US financial derivatives market 2005 first-half net income was $39mm; annualized we will assume $78mm for fiscal 2005 There is a float of 52mm shares and only 3.163mm have been offered to the public. *6.1% of float* EPS: $78mm/52mm = $1.5/share P/E 10/21: $126/$1.5 = 84 There is a lockup on the stock for 6/12/18 months 1/3 of shares free to trade every 6 months. Compared with CME: -IPO issued 13% of float, BOT only issued 6% of float so the rest of those shared will be coming in 6 months. -CME makes money for clearing BOT's trades -Euronext Liffe makes money for matching BOT's trades - CME largest US financial derivatives exchange Here is the kicker though, CME with all 34.37mm shares outstanding is only trading at a p/e of 44. This is probably a decent short term "play," but watch your back long. Of course, I could be wrong and they could regain their lost market shareâ¦they are only the third largest options exchange in the us now! I am a bull, but this is one I see being bought out or dying for lack of any particular CA!
interesting post Enfinity... ....i'm also long both CME and BOT but i'm nervous about the earnings of CME tomorrow...i wouldnt be a suprised to see profit taking on the news (good or bad).
There is nothing wrong with taking your gains! I am always for taking a gain, even if it means that I left something on the table. CME is different than BOT though. CME makes money everytime that BOT commences a trade. If you look at the BOT prospectus you will see that exchange fees are dropped from $285mm in 03, to $204mm in 04. Meanwhile, clearing house fees went up from $0 in 02, to $1.1mm in 03, to $73.5mm in 04. BUT, if you look at the income statement there there is a clearing expense equal to about 2/3's of the clearinghouse revenues they generate. BOT Clearing expenses: 02: $0 03: $972m 04: $54.755mm CME has CA in terms of market share and IP, BOT has basically nothing going for it long term.
Hmmmm.....I wonder who super-ego is? I wonder. I think I may go back and do a search in my PM folder. Back to about '02 or '03 I think I seem to recall someone told me they use Super-ego as an alias at times. I wonder who that was? And to think I used to believe that you were an honorable guy. You'd fit right in on Capitol Hill.
Honestly I don't get it either. I figured it would trade at P/E parity with CME but obviously there's something "hidden" here either in terms of income or going back to self clearing ect.