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The Chicago Mercantile Exchange is one of the world's largest futures and options exchanges. CheMatch.com is a leading business-to-business Internet-based marketplace and information resource for buying and selling bulk commodity chemicals, plastics and fuel products.
Leveraging CheMatch.com's leadership role in the Internet-based bulk commodity chemicals business and the CME's global electronic trading system, the venture will create a new group of derivative products that chemical companies, traders and financial institutions can utilize to improve operational efficiencies and to implement their risk management strategies. Members and customers of the CME can use the products to take a position in the chemicals market.
The agreement also marks the first time futures products will trade on a futures exchange with an electronic link to an online B2B marketplace. Linked via the Internet, CheMatch.com's secure, neutral trading platform and the GLOBEX2 system will provide seamless transitions between the two sites and offer chemical companies, traders and financial institutions the ability to trade both physical and derivative products. Members of the CheMatch.com Global Trading Networksm will be able to enter trades on GLOBEX2 through the CheMatch.com platform at www.chematch.com. The new products will trade exclusively electronically on GLOBEX2 and clear with a CME clearing member firm through the CME's state-of-the-art CLEARING 21® clearing system.
Chicago Mercantile Exchange officials said the CME's new B2B initiative will offer a variety of services to certain online marketplaces that have been established within a broad cross-section of industries. The agreement with CheMatch.com is the CME's first as part of its new effort.
CME Chairman Scott Gordon said: "We are pleased to launch our B2B initiative through this agreement with CheMatch.com. We are being very selective - joining forces with those premier B2B marketplaces such as CheMatch.com that we believe will enjoy accelerated growth with the help of our services."
Carl McCutcheon, Chairman and Chief Executive Officer of CheMatch.com, said: "This agreement is an important development for the chemical and derivatives industries. A liquid futures market will be a great tool to help our clients hedge risks, remove pricing volatility and make better capital expenditure decisions. We're excited to be working with the CME to usher in this new order of electronic trading and to set the stage for trading cash markets and derivative products side by side in one global platform."
Said CME President and Chief Executive Officer Jim McNulty: "Our entry into the B2B arena will leverage the CME's many years of experience and expertise in applying a comprehensive package of critical processes and technology to markets. CheMatch.com is an excellent choice for us because of its focus and domain expertise in the commodity chemicals industry."
Goldman Sachs Investment Research estimates that the value of transactions conducted online between companies will reach $1.5 trillion by 2004, with more than 40 percent of such transactions - $600 billion - passing through organized online marketplaces.
Through its B2B initiative, the CME will offer a variety of "horizontal infrastructure" services customized to the needs of "vertical" B2B marketplace clients, including market structuring, such as product design, self-regulation, rules enforcement and arbitration; clearing services, such as transaction processing, payment and settlement, credit administration, risk management, fulfillment management and guarantees; risk management products, such as futures and options; and traders experienced at providing liquidity to markets. The CME is known for its neutrality, transparency, credit risk management and financial integrity, which will benefit B2B marketplaces, Gordon said.
During a senior management restructuring announced in March, the CME tapped Satish Nandapurkar to serve as its new Managing Director, e-Business, and oversee the new B2B effort. Since that time, Nandapurkar and other CME officials have met with numerous B2B marketplaces such as CheMatch.com to explore possible areas of cooperation, and the CME has chosen CheMatch.com as its exclusive electronic trading platform for certain chemical futures and options products.
The business-to-business effort is one of three major business initiatives the CME has undertaken in recent months as part of a plan for growth. The other two are based on anticipated growth in retail and institutional business.
An international marketplace, the Chicago Mercantile Exchange brings together buyers and sellers on its trading floors and GLOBEX2 around-the-clock electronic trading system to trade futures contracts and options on futures primarily in four product areas: interest rates, stock indexes, foreign currencies and agricultural commodities. Members of the Chicago Mercantile Exchange include the world's largest banks and investment houses, as well as independent traders and brokers.
All over the world, pension funds and investment advisers, portfolio managers, corporate treasurers and commercial banks trade on the CME as an integral part of their financial management strategy. The 200 million contracts changing hands at the CME in 1999 had an underlying value of more than $138 trillion. The exchange moves approximately $1 billion per day in settlement payments, manages $20 billion in collateral deposits and administers over $1 billion of Letters of Credit.
CheMatch.com is a business-to-business, Internet-based marketplace for purchasers and sellers of bulk commodity chemicals, plastics and fuel products. The marketplace incorporates a real-time, interactive trading exchange where members can trade 24 hours a day, seven days a week. Strategic and financial investors include Battery Ventures, Bayer AG (NYSE:BAYZY - news; FSE:BAYG.F), Computer Sciences Corporation (NYSE:CSC - news), E.I. DuPont de Nemours and Company (NYSE:GE - news), Millennium Chemicals (NYSE:MCH - news), H. Muehlstein & Co., Inc., Reed Elsevier, Sprout Group, Stolt-Nielsen S.A. (Nasdaq:STLTF - news; Nasdaq:STLBY - news; Oslo Stock Exchange:SNIB) and TownsendTarnell. Headquartered in Houston, CheMatch.com has international offices in Brussels, Hong Kong, Manchester (United Kingdom), Sao Paulo, Singapore, Tokyo and Zurich.
