CME's Donohue to step down; Gill named new CEO

CHICAGO Mon Mar 12, 2012 6:34pm EDT

CHICAGO (Reuters) - Craig Donohue, CME Group Inc (CME.O)'s chief executive officer since 2004, will step down at year end, to be replaced by current CME president Phupinder Gill, the company said on Monday.

Chairman Terrence Duffy, who has been the face of the company as it navigates the fallout from the failure last October of giant broker MF Global, will take on the additional role of president, the company said.

Donohue, speaking on a conference call with analysts, said his exit was not linked to MF Global's failure, which has rattled confidence in the futures industry and dealt a blow to the exchange operator's trading volume.

CME audited MF Global's books under the industry's self-regulatory system. Some $1.6 billion in MF Global customer money is still missing.

"MF Global doesn't factor in at all to my thinking," Donohue said on the call. "I've been working my way toward this for quite some time."

Still, some observers connected Donohue's departure to collapse of the brokerage. The futures industry had for decades touted the safety of customer money held at brokers, so much so that many traders and hedge funds kept much of their capital at the broker even though it was not needed for trading.

"I think they need some kind of a shake up at the CME because of their deficiencies during the MF Global collapse," said Philip Gotthelf, president of Equidex Brokerage Group. "I believe he is trying to leave before his reputation is tarnished by the MF Global scandal."

FUNNIEST IN FUTURES

Gill, 51, has been with CME since 1988 and ran CME's clearinghouse before joining the office of the CEO eight years ago, when Donohue took his current post.

The appointment of Donohue's second-in-command, known to friends and colleagues by his surname, may go a long way in reassuring markets after MF Global's collapse, said Andre Cappon, president of CBM Group, a New York-based consultant for global exchanges.

"Gill is a very solid, thorough and impressive guy," Cappon said. "Putting Gill in the key job right now is absolutely the right thing because the challenge for the CME is to explain why that won't happen again."

Gill, speaking on the conference call, said CME's "sense of direction will not change" once he becomes CEO.

Neal Wolkoff, former CEO of ELX, a CME rival, and founder of Wolkoff Consulting Services, called Gill a great choice.

"He's probably one of the most knowledgeable people out there, and without question he's the funniest person I've met in the futures industry," said Wolkoff, whose former job pitted him repeatedly against CME's executives in the search for customers.

CBOT, Nymex

Donohue, who began his 23-year career at the CME as a lawyer, oversaw the transformation of CME from a futures exchange known largely for its short-term interest-rate futures to a global powerhouse with a clearinghouse in London and a growing clearing operation for the vast over-the-counter derivatives industry.

Under Donohue's leadership, the owner of the Chicago Mercantile Exchange bought its two largest rivals, the Chicago Board of Trade and the New York Mercantile Exchange, greatly expanding its reach into lucrative assets like oil and Treasury futures trading. Donohue, 50, also spearheaded CME's entry into the index business with its purchase of the Dow Jones Indexes and its joint venture with S&P index owner McGraw Hill & Co.

CME has been under fire in recent months for its handling of the collapse of MF Global, whose $1.6 billion in customer funds are still missing. CME was the MF Global's first-line regulator.

Duffy, 53, has been CME's face on Capitol Hill and in front of regulators.

Donohue, who has worked at CME for 23 years, called his decision "bittersweet," and added that he is "ready to explore new challenges." Donohue last renewed his contract in 2009.

CME shares closed down 2.3 percent at $270.20 on the Nasdaq.

Duffy, on the conference call said Gill's experience and relationships in Asia would benefit CME.

Gill's promotion underscores the emphasis CME is putting on overseas growth, said Ed Ditmire, analyst for Macquarie Research.

"It definitely speaks about how importantly CME views international opportunites," he said.

(Additional reporting by Jonathan Spicer and Thennarasu Kumarasamy; Editing by Carol Bishopric, Gary Hill and Bernard Orr)