Dow Jones Newswires | Shares of exchanges CME Group Inc. and
IntercontinentalExchange Inc. climbed steadily Thursday as the financial
regulation that could push over-the-counter derivatives trades onto
their exchanges appeared to move closer to passing and got a rousing
boost from President Barack Obama’s midday financial speech.
Both exchange operators, along with the rest of their peers, have been
pushing Congress and regulators worldwide to allow them to bring the
over-the-counter trades onto open exchanges, thereby bringing
speculative trades such as credit-default swaps more out into the open.
They argue that by using the exchanges, there will be a central
guarantee for trades done bilaterally, reducing systemic risk such as
that partially blamed for the collapse of financial markets.
CME Group was recently up 6.6 percent, at $343.65, its highest in three months, on nearly twice its typical volume, while ICE climbed 5.4 percent, to $117.90, its highest point since last June.
NYSE Euronext, though not expected to play a role in the reform, also climbed, up 1.3 percent, at $33.04, its highest point since October 2008. Nasdaq OMX Group Inc., which could benefit, rose 0.7 percent, to $22.
Ticonderoga analysts said in a note that while the details of the financial reform remain in flux, it appears the standardization will be part of the final bill, calling CME and ICE the most obvious beneficiaries, but also noting that Nasdaq could benefit.
“The president’s speech today will keep the issue front and center, with next week’s likely movement of the (Sen. Christopher) Dodd (D-Conn) bill to the Senate floor the next major catalyst,” the analysts wrote.
Obama, speaking in New York Thursday, reprimanded Wall Street again as he tried to convince his audience of the need for real financial reform. And in an important switch of rhetoric, he didn’t threaten to veto a bill that didn’t meet his standards, suggesting that regulation appears closer to completion.
He also acknowledged that certain companies could be exempt from derivatives legislation, specifically those, such as agricultural concerns and airlines, that use derivatives to hedge their exposure to constantly changing prices of commodities such as oil. By making the distinction clear between companies and speculators, the president could win support from senators worried about the breadth of the planned restrictions.
Jefferies analyst Daniel Fannon said while there wasn’t any new revelations on reform, it did appear to be inching closer to passing, a positive for the stocks.
“The reaction today, one day like this seems somewhat surprising,” Fannon said, “but the long-term market opportunity is improving.”
