Plans to develop a long-term pricing strategy were first disclosed in September, when CME announced a temporary fourth quarter surcharge on certain fees. Management anticipates that the new fee structure will increase 2001 revenues by about $58 million compared with CME’s fee structure before October 2000. The differential is expected to be about $24 million when compared with the surcharged fees now in effect, assuming no major changes in other factors that affect trading volume.
“CME’s new fee strategy is designed to improve our ability to expand, invest in technology improvements and reach our potential as a new for-profit enterprise and a growth company,” said Chairman Scott Gordon. “During the past three months, we’ve undertaken an intensive and comprehensive effort to analyze our existing price structure in relation to the competitive landscape and solicit input on potential changes from our customers, members and valued intermediaries.”
“Our goals include preserving and increasing liquidity in CME products, charging appropriately for products and services in high demand, and supporting customer choice between open outcry and electronic trading,” President and CEO Jim McNulty said. “We also continue to identify opportunities to reduce operating expenses and improve the value of trading at CME. We want to ensure that our products and services are competitively priced relative to the value we give market participants.”
In the first quarter, CME plans to offer additional value and flexibility in accessing its GLOBEX®2 electronic trading network by introducing a lower-cost virtual private network (VPN) solution that will allow users to access GLOBEX2 via the Internet.
Certain aspects of the new fee structure go into effect on Jan. 1, 2001, with other changes becoming effective later in the first quarter. Some highlights of the changes:
- The new comprehensive fee structure covers nearly all CME products and services, including clearing; GLOBEX2 transactions, connectivity, software and hardware; CME’s automated trade order processing system (TOPS); give-up transactions; floor brokerage activities; market data; exercise and assignment of options; agricultural delivery fees; floor access; and booth space.
- CME has maintained or lowered most futures clearing fees from current levels to preserve liquidity in key contracts.
- GLOBEX2 transaction fees also have decreased in a number of instances to encourage volume increases in electronically traded products. Year-to-date through November, GLOBEX2 volume has risen 110 percent.
- CME is introducing a new tiered pricing schedule designed to reward customers and liquidity providers in CME’s flagship Eurodollar futures and options contracts and other interest rate products.
Chicago Mercantile Exchange Inc. (www.cme.com) is an international marketplace that brings together buyers and sellers on its trading floors and GLOBEX2 around-the-clock electronic trading system. CME offers futures contracts and options on futures primarily in four product areas: interest rates, stock indexes, foreign currencies and agricultural commodities. All over the world, pension funds and investment advisers, portfolio managers, corporate treasurers, commercial and investment banks, futures commission merchants and broker/dealers are among those who trade on CME as an integral part of their financial management strategy. Year-to-date through November 2000, more than 208 million contracts with an underlying value of more than $141 trillion – more than seven times the gross national product of the world’s five largest economies – changed hands at CME. The exchange moves about $1 billion per day in settlement payments, manages $20 billion in collateral deposits and administers more than $1 billion of letters of credit.
