Last week, CME Group Inc. (CME - Analyst Report) and Bank of China signed a Memorandum of Understanding (MoU) to look at possible business collaboration opportunities, particularly in commodities futures and options trading. Additionally, the two institutions will help each other through investor education, employees training and product marketing.
Consequently, CME group will train the employees of Bank of China’s subsidiary – BOCI Commodities & Futures Limited (“BOCI”). Additionally, the exchange will share information on investor education and business development to help BOCI in expanding its product portfolio.
Meanwhile, CME Group will benefit from the large clientele of Bank of China as banks play an important role in informing and influencing customers about available products. Thus, Bank of China will help CME Group in increasing the awareness about its products and services in China, thereby attracting potential clients.
BOCI is already a clearing member of CME Group and helps in increasing the accessibility of the exchange’s listed futures and options offerings, thereby boosting its customer base. The alliance will fortify the part played by BOCI as a clearing member.
CME Group is the largest futures exchange in the world in terms of trading volume and keeps forming international alliances to further increase its volume, product portfolio and earnings. In January 2012, the company announced an agreement with China’s leading ferrous price and indexing service provider – Mysteel – to develop risk management products for the ferrous industry based on Mysteel's market-leading price data services.
Additionally, CME Group signed a MoU in Ukraine and formed various strategic alliances in Mexico, Brazil, Malaysia and Korea in the past few years, leading to substantial expansion of its global footprint. The company’s peers such as NYSE Euronext Inc. and Nasdaq OMX Group Inc. (NDAQ - Analyst Report) are also global players, which actively form international alliances and mergers.
Currently, CME group carries a Zacks #3 Rank, which is equivalent to a short-term ‘Hold’ rating. Additionally, considering the fundamentals, we maintain our long-term ‘Neutral’ recommendation on the stock.