NEW YORK CME Group Inc (CME.O) Chief Executive Craig Donohue is cool to the idea of buying a large options exchange like CBOE Holdings (CBOE.O), and insisted on Wednesday that the exchange operator remained focused on its existing growth strategy despite a rash of industry mergers.
Donahue, who is under pressure to find ways to boost profits from businesses beyond CME's bread-and-butter futures trading, said hyper-competitive, low-margin businesses were not attractive -- and that being big and diverse for its own sake was not valuable.
"The option markets are difficult," Donohue told the Reuters Future Face of Finance Summit in a telephone interview. "That business is pretty transitory and moves around from exchange to exchange. That's a risk factor for somebody who wants to make a major acquisition in the options area."
"We generally don't like to get involved in things where we don't think we are going to add something incredibly valuable," he said.
CME has long been seen as a likely buyer for the parent of the Chicago Board Options Exchange, the top U.S. options venue. Late last month, a source told Reuters that CBOE was formally open to "strategic transactions" such as a sale or merger with another exchange operator.
CBOE shares jumped 1.5 percent then quickly dropped 1 percent to their intra-day low in the minutes after Donohue's comments, before recovering some losses to close down 0.7 percent at $27.59.
Asked if CME would consider a counterbid for NYSE Euronext NYX.N, perhaps along with Nasdaq OMX (NDAQ.O), Donohue said: "We are pretty much focused on our strategy, growing our business ... and we are really focused on the developing and emerging markets."
Deutsche Boerse (DB1Gn.DE) has agreed to buy NYSE for more than $10 billion. But another source said last month that Nasdaq, left out of the merger frenzy, was looking at its alternatives, including the possibility of teaming up with CME or IntercontinentalExchange Inc (ICE.N) to bid on NYSE.
Donohue said CME saw growth opportunities in markets such as Brazil and Mexico in Latin America, and China and India in Asia.
"That's where the fundamental economic growth and wealth creation is going to be," Donohue said.
FOCUS ON STRATEGY
CME, which runs the Chicago Mercantile Exchange, the Chicago Board of Trade and the New York Mercantile Exchange, also has growth opportunities in various product lines and new ventures, such as over-the-counter derivatives clearing and index services, he said.
A year ago, CME bought 90 percent of Dow Jones' namesake indexes business in a debt-funded joint venture that valued the century-old business at $675 million.
"That's where we are targeting our efforts," Donohue said, referring to such markets and products.
Still, CME is facing competitive pressures on its home turf. Separately, NYSE said on Wednesday it will launch its long-awaited challenge to CME's lucrative interest rate futures franchise on March 21.
CME has made some major acquisitions in the last few years, including buying the CBOT for nearly $12 billion in 2007.
Donohue said CME had moved past distractions that come with major deals, such as getting regulatory and shareholder approvals and then integrating the businesses.
"It's not so much that we are standing on the sidelines, as much as we have a very clear view of our company and our growth strategy and what we are trying to do," he said.
CME shares closed down 0.8 percent at $304.04 on the Nasdaq.