In an attempt to expand its presence in the emerging markets, CME Group Inc. (CME) has partnered with India’s largest stock exchange National Stock Exchange (NSE) for a cross-listing pact that includes license agreements covering benchmark indexes for the U.S. and Indian equities. Besides, CME and NSE have also entered into a Memorandum of Understanding (MoU) for impending collaboration related to development and distribution of financial products and services.

According to the cross-listing arrangement, CME will be able to track the S&P CNX Nifty Index (the Nifty 50), the leading Indian benchmark index for large companies accounting for 22 sectors of the Indian economy, on its exchange for the creation and listing of U.S. dollar-denominated futures contracts for trading on CME. On the other hand, NSE will have the rights to the S&P 500 and Dow Jones Industrial Average (DJIA) indexes of CME for the creation and listing of rupee-denominated futures contracts for trading on NSE. Moreover, the investors in India will be able to buy and sell S&P 500 and Dow Jones contracts in rupees, thereby helping them widen their portfolio choice with convenience. However, this is subject to regulatory approval.

With the help of this agreement, CME will be the only exchange in both the U.S. and Europe that can avail the license to the Nifty 50 from NSE’s affiliate India Index Services & Products Ltd. (IISL). This will provide a competitive edge to the company while also expanding its horizons in the emerging and rapidly developing nations including India, Brazil , Dubai , Korea , Malaysia , Mexico and Singapore through partnerships or investments. CME’s strategic efforts will further increase access for global investors from within these regions to the company’s business portfolio.

Estimate Revisions

Over the last 30 days, nine of the 19 analysts covering the stock have increased the estimates for the first quarter of 2010, with no downward revisions. The Zacks Consensus Estimate for the first quarter is $3.62 per share, which would be an increase of 13.0% from the year-ago quarter.

Looking Ahead
CME is working vigorously to further enhance its derivatives markets, where the company already has a strong foothold, and by focusing on strict expense control through various cost-cutting initiatives. Going ahead, we believe CME’s internal efforts to promote, expand and cross-sell its core exchange-traded business through meaningful acquisitions, a diverse and strong portfolio along with its global presence will generate a decent growth in the longer term.
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