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NMX - Nymex Holdings Inc
DOW JONES NEWSWIRES CHICAGO -(Dow Jones)- The chief executive of CME Group Inc. (CME) said Friday the U.S. Department of Justice's request for an antitrust review of exchange-controlled clearing houses was probably not a "warning shot" in opposition to CME's proposed acquisition of Nymex Holdings Inc. (NMX).
Speaking at a Credit Suisse investor conference, CME CEO Craig Donohue said the Justice Department's recommendation to the U.S. Treasury Department was likely in the works before CME confirmed it had begun preliminary merger discussions with the parent company of the New York Mercantile Exchange.
The Justice Department's comments caused near-panic selling of CME and Nymex shares on Wednesday, leading to an 18% drop in the share price of both exchanges. The dramatic selloff was due, in part, to speculation that increased regulatory scrutiny would make it more difficult for a CME-Nymex deal to win approval.
Thursday, share prices erased a chunk of those losses as some equity analysts stated the share price declines were overdone. Recently, CME shares were down nearly 1% at $524. Nymex shares were recently up 1.1% at $96.05, having posted an all-time record low of $86.61 on Wednesday.
Donohue noted that the government's concern focuses on clearing of financial derivatives products, and not energy and metals markets, which are the Nymex benchmarks.
The Justice Department, in the wake of recent criticism by some federal lawmakers, released a follow-up letter Friday stating that its antitrust division "did not take a position on what action, if any, that should result from such a study, and contemplated that Treasury would take into account a range of considerations."
Also, Justice officials noted they found last year's merger of CME and the Chicago Board of Trade did not violate antitrust laws.
Donohue on Friday repeated earlier remarks that in-house clearing has been a "topic of intense debate" for the past 25 to 30 years. He recommended that investors consider the matter as a "perennial issue" lasting many more years.
Donohue said if exchanges like CME are forced to do business with a "third-party" clearing operation, it may have to "wait in line behind six or seven exchanges" to process trades.
CME's clearing facility, said Donohue, is a "tremendous source of value to use, and not just financially."
He said the clearing house is "very transparent," and "very resilient," and enables the exchange to guarantee every financial transaction.
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This might a good one to investigate further due to the big sell off this had under the circumstances being. If this deal falls through which it looks as if it should, there should be good volume to the up side starting with short covering. Ill dig in to find more info as soon as I can. Any help would be appreciated.
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