Is the CME the Google of the Exchanges?

[brownsfan019 17]

CME at it again:

 

CME Group in talks to buy Nymex for $11 bln

 

http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSN2845912620080128

 

NEW YORK, Jan 28 (Reuters) - CME Group Inc (CME.N: Quote, Profile, Research) is in preliminary discussions to buy Nymex Holdings Inc (NMX.N: Quote, Profile, Research) for roughly $11 billion, the companies said in a joint statement on Monday.

 

Under the terms being discussed, CME, the parent of the Chicago Mercantile Exchange, would pay Nymex shareholders $36 in cash and 0.1323 of a CME common share for each Nymex share owned.

 

Based on CME's closing price on Friday, the preliminary offer values Nymex shares at roughly $119.22 each, an 11 percent premium to Nymex's closing share price on Friday.

 

The companies said they have agreed a 30-day exclusive negotiating period, according to the statement.

 

"Everyone expected a merger with someone at some point," said Tom Bentz, an analyst with BNP Paribas.

 

Nymex shares were up 6 percent in early trading to $113.95, and CME Group shares were up 2 percent at $642.50.

 

CME Group said the preliminary terms would see it maintain trading floors in the New York City area, according to the statement. Nymex would also repurchase 816 New York Mercantile Exchange memberships upon the deal's closing for a total price not to exceed $500 million, the statement said. (Reporting by Lilla Zuill, additional reporting by Janet McGurty, editing by Gerald E. McCormick and Steve Orlofsky)

 

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While exciting to watch all that the CME is capable of, where exactly is this train headed? .....

 

Soon it will be CME vs. NYSE vs. Nasdaq. Everything else will be gobbled up sooner or later.

 

The question is, is that a good or bad thing for the retail trader and investor? I love the CME and their platforms, but if they are the only game in town, they can easily dictate fee structure. Almost the definition of a monopoly, right?

[thrunner 10]

The question is, is that a good or bad thing for the retail trader and investor? I love the CME and their platforms, but if they are the only game in town, they can easily dictate fee structure. Almost the definition of a monopoly, right?

I have always thought that Google can run an exchange better than any of these outfits such as CME. So the question really is how difficult is it to start an exchange by any firm and have traders trade the instruments. Google certainly has the means and perhaps partnering with other banks and investment firms, can put up a real cheaper, faster and more reliable alternative to CME.

[brownsfan019 17]

I have always thought that Google can run an exchange better than any of these outfits such as CME. So the question really is how difficult is it to start an exchange by any firm and have traders trade the instruments. Google certainly has the means and perhaps partnering with other banks and investment firms, can put up a real cheaper, faster and more reliable alternative to CME.

 

runner - Wow, you took that in a completely different direction!

 

My use of Google was more of an analogy - that the CME is to exchanges as to what Google is to the web. Sorry if that wasn't clear.

 

Who knows what it takes to start an exchange. Lots of time and money, both of which Google has. That'd be weird... trading on the Googex. :rofl:

[thrunner 10]

runner - Wow, you took that in a completely different direction!

Thanks, I think. Actually I knew what you meant perfectly. I was just thinking outside the box and wondering outloud whether anything these exchanges are doing is any different from what Google can do- which is to provide almost instant dissemination of data across a wide network and to do it accurately, fairly and cheaply (something arguably CME hasn't done recently). If anybody can replicate an exchange cheaply, Google can. Which begs the question as to how much these exchanges are worth.

[brownsfan019 17]

Ok, we were both in the same book, just different pages.

 

I think google could easily create an exchange that would simply put everyone else out of business. Talk about a massive undertaking, but they have the funds and tech savy to do so. Maybe one of their web crawlers will stumble across our thread here and get the wheels moving.

 

All we ask is for a small cut of the profits, right? :o

[mister ed 10]

All we ask is for a small cut of the profits, right?

 

OK, I better get involved in this thread...

 

Back on track, very interesting idea for a thread BF, and very interesting come back from thrunner. I read somewhere recently of an idea to open up the CME contracts to alternative exchanges, sort of like all the different ECNs on the Nasdaq - didn't bookmark it though so cant find it again.

[torero 10]

While I think CME is a great exchange, but I cannot imagine if they go down, all will go down all they own.... hmmmm. So if a major crisis day, guess what? The whole financial system stops? Variety is a spice of life, the basis of capitalism, not a few owning 90% of the market.

[mister ed 10]

While I think CME is a great exchange, but I cannot imagine if they go down, all will go down all they own.... hmmmm. So if a major crisis day, guess what? The whole financial system stops? Variety is a spice of life, the basis of capitalism, not a few owning 90% of the market.

 

Thats a really good point...scary.