(Reuters) ? Don't expect a new round of mega-mergers to sweep the global exchange industry, the chief executive officer of the biggest U.S. futures exchange operator said on Thursday.
While merging exchanges to create "national champions" will likely continue to be successful, "very complex, cross-border deals - probably much less so," CME Group Inc. CEO Craig Donohue said at a Credit Suisse investor conference.
CME, which has stayed away from cross-border deals, cemented its national dominance through domestic takeovers in 2007 and 2008
Earlier this month, European regulators rejected the merger of NYSE Euronext and Deutsche Boerse AG, making it the third large international exchange combination to fail in the last two years.
Shortly after getting the bad news that ended that $7.4 billion deal, NYSE chief Duncan Niederauer forecast exchange leaders would need time to regroup before pursuing any new deals, and he said that more companies would likely follow CME's example and return more money to shareholders.
CME had announced one day earlier a large increase in its dividend that cheered investors and sent its shares soaring. The shares had languished over the previous few months as investors fretted about the fallout from the collapse of MF Global, one of CME's largest customers, and the disappearance of hundreds of millions of dollars of traders' funds.
Speaking on Thursday, Donohue said the new dividend policy showed confidence in CME's ability to continue to grow without new mergers or acquisitions.
"It also removes doubt about whether we are kind of keeping capital for various and sundry reasons related to things like MF Global, or other types of increased capital costs to help deal with regulation," Donohue said.
CME's open interest fell late last year, in part because MF Global's failure sapped confidence in the safety of the futures industry. Open interest - a predictor of future trading activity - has since picked up strongly, Donohue noted.
CME's trading volumes this year are likely to be helped by the Federal Reserve's decision to publish interest-rate forecasts from its policymakers, Donohue said.
At its latest policy-setting meeting in January, the Fed signaled it would keep rates low through late 2014, exactly the kind of indication of rate stability that would typically dampen interest in CME's rate futures, which are often used to hedge against unexpected changes in borrowing costs.
But Fed policymakers, as part of their first public rate forecasts, also gave a wide range of projections for when they thought the first rate increase should be, with some saying it should be as soon as this year and others saying it should not be until 2016.
"We actually thought that was positive for us," Donohue said, because the broad range of opinions means uncertainty and for CME, uncertainty means business
"Market participants are almost always building open interest and positioning themselves well in advance of actual rate increases," Donohue added.
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