Rise Of The CME Leviathan Posted on www.TheOptionsInsider.com in Comment Letter by Mark S. Longo Rise Of The CME Leviathan Money Talks CME Group completed its acquisition of the New York Mercantile Exchange (NYMEX) this week. The acquisition marked the final act in a dramatic takeover drama that has both captivated and concerned the futures world. The final terms of the acquisition were announced on Thursday. NYMEX shareholders that opted to receive CME Group stock were paid $7.29 in cash and .2164 CME shares for every NYMEX share. (That amounted to $80.98 at the time of this writing.) Shareholders that opted for a cash payment received $81.16 for every NYMEX share. Despite those lucrative payouts, the CME/NYMEX deal almost fell apart due to a dispute over taxes. NYMEX members were outraged that an additional $750,000 payment for exchange members was taxable as ordinary income. It took a great deal of behind-the-scenes wrangling, along with a promise to produce $60 million in cost savings, to finally seal the deal. And Then There Was One... The NYMEX acquisition completes the CME's transformation into the leviathan of the derivatives market. Already a powerful player in the futures realm, the CME's acquisition of the Chicago Board of Trade (CBOT) last year propelled it into a rarefied position in the financial world. The combined CME/CBOT entity (aka CME Group) controls 98% of the U.S. futures market. In the history of the U.S. financial system, few exchanges have approached that level of dominance in a major financial sector. You would have to travel back in time to the early days of the New York Stock Exchange to find something even resembling an analogue. However, even at its height, the NYSE did not have the same market share that CME Group enjoys today. It also participated in a market that was far smaller, and had far less influence, than the modern U.S. futures market... rest of article & links here: http://www.theoptionsinsider.com/comment/?id=119
I find it scary. They can do whatever they wants with exchange fees, regulations and all "improvements" they have made since acquisition of CBOT have been bad for the little trader( 5 deep DOM, block trades, introduction of LMMs, matching algos... ). I wish the new exchange ( don't remember the name ) formed by hedge funds and IBs will introduce more balance or even just force CME to maintain low exchange fees...