Chicago Merc’s Parent Files for an IPO

The parent of the Chicago Mercantile Exchange said Monday it has filed for an initial public offering, becoming the first major U.S. financial exchange to seek approval to go public. It said it will use the proceeds for possible acquisitions and technology upgrades.

The 104-year-old CME, the world’s No. 2 futures exchange, is beefing up its electronic trading capabilities as many futures instruments move away from boisterous open-outcry pits.

Derivatives exchanges are under pressure to transform from traditional open-outcry trading to computer-based systems, which advocates say are cheaper and more efficient.

The CME plans to roll out new technology, designed to boost electronic trading of its flagship Eurodollar contract in the United States as well as overseas, this summer.

The filing with federal regulators by the CME, which offers futures and options on interest rates, stock indexes, currencies and commodities, marks the final stage of the exchange’s tough transition, begun several years ago, from an enterprise controlled by members to a publicly held company.

Futures and options provide a way for investors to protect against--and profit from--price changes in financial instruments and physical commodities.

Sources familiar with the planned stock sale said the exchange may not offer its shares to the public until the fall, to avoid coinciding with summer holidays and the anniversary of the Sept. 11 attacks.

The CME’s parent, Chicago Mercantile Exchange Holdings Inc., along with certain CME shareholders, plans to sell Class A shares in the offering, the exchange said. The number of IPO shares and the price range were not disclosed in the preliminary prospectus filed with the Securities and Exchange Commission.

Although no other financial exchange in the U.S. has filed for an IPO, several other exchanges are close behind.

The Nasdaq Stock Market has said that it is preparing for an IPO, possibly as early as the fourth quarter of this year.

Founded in 1898 as a member-owned institution, the CME in November 2000 became the first U.S. financial exchange to de-mutualize, transforming to a for-profit, shareholder-owned corporation, the first step toward an IPO.