Case | HBS Case Collection | January 2011 (Revised April 2011)

CME Group

by Forest L. Reinhardt and James Weber

Abstract

The case describes CME Group, the world's largest commodities exchange, futures and options on futures contracts, history, regulation, and the strategic choices the company faced. CME Group was formed from the oldest and most well-known exchanges in the world. Traders on the exchange bought and sold contracts in order to hedge risk or speculate on future price trends. In recent decades trading had undergone significant growth. From its roots in agricultural commodities, with trading typically occurring in face-to-face transactions in pits on exchange floors, CME introduced new hedging products in metals, energy, and finance, and electronic trading, which brought new market participants. Some of these new participants, such as pension funds, were significantly larger and had different strategic agendas than the traditional agricultural related participants. The case raises the question of whether increased speculation was helping or hurting the exchange or its participants. In addition, the financial crisis of 2007 and 2008 was driving new regulation in the industry which brought new challenges and opportunities to CME.

Keywords: Financial Crisis; Stocks; Goods and Commodities; Governing Rules, Regulations, and Reforms; Risk Management; Market Participation; Market Transactions; Financial Services Industry; United States;

Citation:

Reinhardt, Forest L., and James Weber. "CME Group." Harvard Business School Case 711-005, January 2011. (Revised April 2011.)