Earlier this year, the Battle of the managed futures conglomerates (CME vs. ICE) made an interesting turn. As we noted in a previous post, WTI Crude Oil future contracts were taken over by Brent contracts on the CME’s New York Mercantile Exchange. This is important to note because WTI was the preferred crude oil contract around the world, and primarily traded only on the CME, giving them the leg up they needed. For those of you who are new to our blog, you’re probably wondering , what does that mean for the exchanges? You lose liquidity; you lose the enticement from investors.
But there’s another Exchange that is making headlines in the managed futures world, The DME. The Dubai Mercantile Exchange just came off a record trading volume this past month at 6,978 ADV. To put that in perspective, that’s a 9% bump from their previous record, and a 32% bump compared to June’s numbers last year. If you haven’t heard a lot about the DME in the past, there’s a reason; it’s only been around for eight years.
So what does this mean for the international battle between the CME and the ICE? Well Goldman Sachs, JP Morgan, and Morgan Stanley started becoming shareholders, and not long after the CME bought out the CME. With those great numbers, the CME couldn’t help but publicize the event, with a Q&A article on the CME’s website.
Naturally, this strengthens CME’s position to re-establish themselves as the global managed futures exchange. Plus, CME is going by the motto, “If can’t beat the competition, buy a smaller competitor and use them to supplement your power. “ AKA Earlier this year, the CME invested capital into the DME in hopes of establishing the Oman crude oil futures contract (which is the primary contract for the Middle East and Asia).
The CME is clearing the business so they want it to grow. Plus the contract is tied to a separate production pool so it won’t necessarily take away from WTI unless the major oil industry players decide that DME is a better benchmark for crude than the CME.
As for the CME and ICE showdown, here’s an updated chart as to where they stand midway through the year.
(Disclaimer: past performance is not necessarily indicative of future results.)