Revenue from trading products in countries like Brazil, South Korea, China, Mexico and India will account for an increasing and significant portion of total revenue for CME Group Inc, as the world's largest futures exchange embarks on a bullish global expansion strategy, Chief Executive Craig Donohue said in an interview on Thursday.
Although the global derivatives market is still in its early stages, emerging markets will become active users of sophisticated trading products within the next five to 10 years, Donohue said on the sidelines of the Securities Industry and Financial Markets Association's annual meeting here.
Donohue said he sees CME's recent purchase of 10 percent of Brazil's BM&F, the world's fourth largest futures exchange, adding to revenue in the "immediate to near term." CME hopes to develop new trading products in agricultural commodities and carbon trading, among others, as part of its agreement with BM&F.
Brazil is Latin America's busiest financial market. New York Stock Exchange operator NYSE Euronext recently acquired a 1 percent stake in the Sao Paulo Stock Exchange, owned by Bovespa Holding SA, as part of its global expansion spree. Exchanges the world over are buying stakes in each other as new technologies enable them to offer sophisticated trading products across national boundaries.
NYSE Euronext Chief Executive John Thain has often said he sees four to five global exchange groups emerging, each of which will offer trading in various products, including stocks, options and futures.
Donohue said his exchange is "very focused on global growth." China, India and Mexico will help drive revenue growth in the longer term, he said. CME would be interested in entering "all the BRIC countries (Brazil, Russia, India and China) and also other emerging markets that may not be as large as the BRICs," Donohue said.
Donohue refused to disclose what percentage of total revenue CME expects to earn from these new markets, but said it would be significant. CME acquired the Chicago Board of Trade in July, and the combined entity holds about 85 percent of the US derivatives trading market.
CME recently signed a letter of intent with South Korea's Korea Exchange to list the popular KOSPI 200 futures contract in 2008. Donohue said the Brazilian deal and CME's agreement with Korea "are examples of the kind of global strategy we might have, to diversify our products."