Treasury Department To Increase Fees

The Treasury Department of the US is planning to start a steady increase in fees, capital standards and down payment requirements. According to a senior official, this is done with a view to gradually limit the activities of mortgage companies Fannie Mae (FNMA) and Freddie Mac (FMCC). Jeffrey Goldstein, the Treasury Department’s under secretary for domestic finance was quoted saying that there is a consensus among the government authorities that the immediate thing to do to lessen the government’s shadow is the shrinking of the affairs of Fannie Mae and Freddie Mac. In a speech prepared in advance, he said that the government should go about the task slowly and following a preformed schedule. Goldstein said the authorities would co-operate with the Federal Housing Finance Agency to start the process without further delay.

Of late, the market rumor that was making its rounds was that CME Group (CME) might place a counter bid for NYSE Euronext (NYX) to interrupt the amalgamation of NYSE and Deutsche Boerse. CME is the foremost derivatives market in the world. It puts for sell a great variety of products for all chief asset classes which consists of futures and choices founded upon interest rates, equity indices, foreign exchange, energy, agricultural commodities, metals, weather and real estate. Apart from that it also offers services like clearing and settlement jobs for exchange-traded contracts as well as over-the-counter derivatives. NYSE Euronext and Nasdaq OMX (NDAQ) have been its major competitors in the market traditionally. However, newly founded exchanges like BATS Global and Chi-X along with global exchanges have started to claim a portion of their market share. The value of the CME Group’s stock has been calculated at $330. In comparison to current market price, it is about 5% higher.

In recent times, Stock exchanges all the world over have been collaborating or assimilating with other market fields to reduce cost and put forward an improved contention against the modern electronic exchanges, which have been playing a major role to lessen the difficulties of entering into business. The amount of dealings done is a significant scale for exchanges because the additional expenditure of business dealings once the setup of technological infrastructure is complete is minimal.

The CME Group is not likely to submit offers for NYSE Euronext as their stock trading business is one with a narrow margin of profit and great levels of competition. In contrast, trading in futures and other derivatives, offer a far greater rate of growth and bigger businesses for the exchanges. Moreover, CME mainly deals in futures trading and is controlled by the Commodity Futures Trading Commission (CFTC). In the event of its buying out NYSE, it would come under the department of Securities and Exchange Commission (SEC), who can enforce further limitations on its present business. The fusion of CME Group and NYSE Euronext can also lead to antitrust concerns as combined these two can have a much greater impact on the U.S. derivatives market. A merging of CME and NYSE would also mean concentrating in the U.S. market at a time when most of the prospective growth is in the international markets like Brazil, India and China.

The CME Group is not at much of a risk from a potential merging of NYSE Euronext and Deutsche Boerse. Having already competed with them individually, it had managed to raise its average daily volume of energy contracts from 1.35 million contracts in 2008 to 1.67 million in 2010. The trading volume is expected to continue rising steeply to about 2.3 million contracts by 2013 resulting from an increase in volumes and in algorithmic trading.