CME Group, the world's leading and most diverse derivatives marketplace, and BM&FBOVESPA, the world's third largest exchange company by market capitalization, today announced they have agreed to become Global Preferred Strategic Partners and to develop a new multi-asset class electronic trading platform that will be deployed by BM&FBOVESPA for use in its cash equities and derivatives markets.
CME Group and BM&FBOVESPA intend to work together as Global Preferred Strategic Partners to advance their mutual interests in globalizing their respective businesses through jointly identifying and pursuing opportunities for strategic investments and partnerships with other international exchanges. As part of the expanded partnership, BM&FBOVESPA will increase its ownership interest in CME Group to 5%, the same approximate stake CME Group currently has in BM&FBOVESPA.
The new multi-asset class electronic trading platform will be jointly developed by both exchanges and will be used by BM&FBOVESPA in its cash equities and derivatives markets, and both exchanges will have the ability to license the platform to other exchanges internationally. The new platform will offer customers an industry leading technology platform for global derivatives and equities trading, with the additional benefit of having access to an integrated derivatives and equities technology solution. The companies have agreed to an exclusive negotiation period to enter into definitive agreements. Development of the new system will begin immediately and is expected to launch in early 2011.
BM&FBOVESPA will increase its ownership stake in CME Group, which will sell the shares at a price of $275.12 per share. The closing of the transaction is subject to the negotiation of definitive agreements, BM&FBOVESPA shareholder approval, the expiration or termination of the waiting period required under the Hart-Scott-Rodino Antitrust Improvements Act and other customary closing conditions. Following completion of the transactions, CME Group will nominate a senior representative of BM&FBOVESPA to the CME Group Board of Directors. CME Group already holds a seat on the BM&FBOVESPA Board of Directors. Each party will have the right to maintain its board seat during the term of the strategic partnership subject to certain minimum requirements.
CME Group also announced that its Board authorized a plan to repurchase up to 2.35 million shares of its Class A common stock. Any shares purchased pursuant to the plan would offset the dilution from the issuance of shares to BM&FBOVESPA.
"Our decision to become Global Preferred Strategic Partners and to develop a new multi-asset class technology provides additional opportunities to further expand our businesses," said CME Group Executive Chairman Terry Duffy. "BM&FBOVESPA has successfully demonstrated its growth potential and has emerged as a leading force in the exchange industry. The development of this new platform will combine the best of our technology expertise and further solidify our commitment to working together to bring innovative and new trading solutions to the global marketplace."
"Our proposed transaction with BM&FBOVESPA will further expand the breadth of our technology and distribution capabilities into the global cash equities and options markets, while strengthening our strategic partnership and enhance our mutual opportunities to invest in and partner with the world's leading multi-asset class exchanges," said CME Group Chief Executive Officer Craig Donohue. "Building on our already successful partnership with BM&FBOVESPA, we intend to work together to deploy the new platform for the cash and derivatives business segments of BM&FBOVESPA, one of the world's leading stock and futures exchanges. This enhances CME Group's opportunities to selectively diversify into the cash equity and options segments in emerging markets, where we believe the growth and profit opportunities are most attractive."
"This investment and preferred strategic partnership place Brazil and BM&FBOVESPA in an outstanding position within the global market. With this agreement, the Brazilian Exchange takes a decisive step towards the consolidation of its position as a trading hub, providing the capital, financial and commodity markets with liquidity," said Arminio Fraga, BM&FBOVESPA Chairman of the Board.
"I am confident that this Global Preferred Strategic Partnership will pave the way for the Brazilian Exchange to have new growth opportunities, mainly in countries and markets with high growth potential," said Edemir Pinto, Chief Executive Officer of BM&FBOVESPA. "I have no doubt that, after this partnership and based on technology derived from the CME Globex trading system, as well as on new technology to be jointly created by the parties, this new BM&FBOVESPA technological standard will produce a system to meet the high performance requirements of the world's most demanding traders in multiple products."
The Global Preferred Strategic Partnership includes the following:
- BM&FBOVESPA and CME Group will work together to pursue strategic investments and commercial opportunities with other exchanges.
- BM&FBOVESPA and CME Group will explore other opportunities, such as multilateral order routing linkages between their current and future international exchange partners, and further development of clearing and over-the-counter services.
The development of a new multi-asset class trading platform between CME Group and BM&FBOVESPA includes the following:
- In early 2011, BM&FBOVESPA will replace its existing trading systems with the new platform.
- BM&FBOVESPA and CME Group will join efforts to develop a multi-asset electronic trading platform to process orders and trades across a number of financial products, including but not limited to: cash equities; equity derivatives; futures on stock indices, interest rates, exchange rates and commodities; spot exchange rates; government bonds and private issuers' bonds (fixed-income securities).
