| CHICAGO, July 21
CHICAGO, July 21 Will the United States
default on its debt? Will Greece leave the euro?
Large financial firms like Chicago-based CME Group Inc
(CME.O) are beginning to make contingency plans in the event
these scenarios become a reality.
"It's going to be fascinating, and quite frankly, there are
a number of contingencies that we are contemplating," CME
managing director Derek Sammann told Reuters in an interview.
"We have a series of contingency plans in place whereby if
there were to be an unforeseen event, yet planned for, we are
He said he couldn't give details.
The White House said on Thursday that momentum was building
for a deal to cut the deficit and raise the nation's $14.3
trillion debt cap, allowing the United States to keep paying
its bills. [ID:nN1E76J292]
Euro zone leaders meanwhile threw their support behind a
plan to help Greece overcome its debt crisis. [ID:nL6E7IK2VL]
But CME, whose clearing business is literally managing
risk, is taking pains not to be caught by surprise, Sammann
Should the U.S. default on its debt, Treasuries that CME
holds as collateral to back trades at its markets would likely
drop sharply in value, disrupting trading as investors
scrambled to meet their margins.
Any default in Europe, where CME also operates a
clearinghouse, could be damaging as well. And though a Greek
exit from the euro is considered unlikely, it could require a
revamp of the CME's popular euro futures contract and leave the
market without instruments to trade a new Greek currency.
CME monitors collateral closely and will make "appropriate
collateral haircuts " when needed, CME told Reuters earlier
In the end, Sammann said, CME expects to benefit whatever
"We have to be prepared for what does come, and let me tell
you, increasing volatility will be coming from the uncertainty
coming out of southern Europe and other parts of the world as
well," he said. "That breeds uncertainty, uncertainty breeds
volatility, and volatility is good for business."
(Reporting by Jeb Blount; Editing by Andrew Hay)