By Ros Krasny
NEW YORK (Reuters) - CME Group Inc CME.N, the world's largest derivatives market, can benefit from the current rough patch in global financial markets, its executive chairman said on Monday.
Months of credit-market chaos, leading to such events as the sale of investment bank Bear Stearns in March, have made centrally cleared exchanges more appealing, Terry Duffy said at the Reuters Exchanges and Trading Summit in New York.
"Who would think that a prime broker would not be a counterparty that you could rely on? Even though JPMorgan stepped in and was able to assume the Bear Stearns' exposures, I think that is something that a lot of people never believed could happen," he said.
As a result, "the centrally cleared model that the CME provides ... is becoming, I think, more and more attractive for a lot of clients."
Duffy said CME had not been hurt by the "deleveraging," or reduction of exposure to risk, under way at many financial firms in the wake of the tightening of the credit market.
Open interest in Eurodollar futures and options, used to bet on and hedge against changes on U.S. short-term interest rates, is down 5 percent to 20 percent at various points on the yield curve from its peak in 2007.
But Duffy said the drop was "not a deleveraging issue, of people not being able to participate in the marketplace."
As well as worries about financial market stability, CME's shares have been hit this year by a Department of Justice call for a shake-up in futures exchanges, including an end to markets owning or controlling their own clearing houses.
From a peak over $700 in late 2007, CME closed on Monday at $489.35 per share, up $1.96.
For now, CME remains focused on finalizing its purchase of NYMEX NMX.N, the New York metals and energy exchange.
"We try to manage for the long haul and try not to get too bogged down with the stock prices," Duffy said.
Swallowing NYMEX, less than a year after the Chicago Mercantile Exchange and the Chicago Board of Trade joined forces to create CME Group, would given the firm a market share in the U.S. futures business exceeding 95 percent.
The NYMEX offer as originally announced was worth some $11 billion, but its value has fallen along with CME shares.
"This is still a $9 billion to $10 billion transaction depending on where our stock is on any given day. So a very big deal," Duffy said.
(Editing by Toni Reinhold)
(For summit blog: summitnotebook.reuters.com/)
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