CME in $16bn bid for Chicago exchange rival Cboe

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Derivative exchanges updates

CME Group has approached fellow Chicago exchange company Cboe Global Markets about an all-share deal to acquire the owner of the Vix volatility indices for nearly $16bn.

CME, the world’s largest futures exchange operator, has offered 0.75 of its own shares for every Cboe share, according to three people familiar with the matter. The price would value Cboe at about $150 per share, around 20 per cent above its current price of $123.

After the Financial Times first published news of the approach, CME issued a denial.

“CME Group denies all rumours that [it] is in conversations to acquire Cboe Global Markets. The company has not had any discussions with Cboe whatsoever,” it said.

Cboe said that it “does not comment on market rumours or speculation”.

Late on Wednesday, CME shares slipped 3.8 per cent to $197.58, while Cboe was off 0.1 per cent to $123.94 in New York.

A takeover would bring together two of the most important names in global financial derivatives. CME would diversify its product lines far beyond futures and options contracts related to such commodity markets as oil and wheat as well as US interest rates.

Cboe, formed out of a predecessor of CME in 1973, owns the Vix indices and contracts, as well as equity options exchanges, three stock exchanges and an extensive share trading and clearing business in Europe.

Volumes of equity options trading have soared in the past year as fund managers have looked to ride the rebound in equity markets from the coronavirus-induced crash of March 2020. Retail investors have also piled into commission-free trading in options offered by brokers like Robinhood. The S&P 500 stock index has doubled in the past 18 months, while volume in options on technology stocks such as Tesla, Apple and AMD has soared.

OCC, the US’s main options clearing house, said last month it had seen a record July, with nearly 800m contracts cleared, up 29 per cent on the same month a year before. Average daily volumes for the year are up 42 per cent at 37m contracts per day, the clearing house said.

If a deal is struck, it would extend the dealmaking spree among the world’s largest exchange groups, which are scaling up and concentrating the trading data and information that underpin financial markets among a handful of large players.

In 2019 just over half of the $35bn in revenues the industry generated came from just five exchange operators — CME, Intercontinental Exchange, London Stock Exchange Group, Deutsche Börse and Nasdaq — according to Burton-Taylor International Consulting.

In recent years LSE Group bought data and trading provider Refinitiv for $27bn while ICE snapped up mortgage software provider Ellie Mae for $11bn. It would also be the CME’s largest acquisition since its $7.9bn cash-and-shares purchase of the New York Mercantile Exchange in 2008.

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