What is the main purpose of this 8-K filing?

The main purpose of this 8-K filing is to announce the completion of the formation of the S&P/Dow Jones Indices LLC joint venture between CME Group Inc. and The McGraw-Hill Companies, Inc., and to disclose the associated material definitive agreements, specifically the S&P License Agreement and the Dow Jones License Agreement.

What are the implications of the S&P License Agreement for CME Group?

The S&P License Agreement allows CME Group to use certain S&P stock indexes and related trademarks to create, list, trade, and clear futures, options, and other derivative contracts. CME Group will pay a quarterly fee based on a percentage of its equity index product complex profits. The license grants generally exclusive rights for futures and options on futures for many S&P indexes, enhancing CME's ability to offer and profit from products based on these widely followed benchmarks.

What is the duration and renewal structure of these license agreements?

The S&P License Agreement runs until December 31, 2017, or one year after CME Group ceases to own at least five percent of the joint venture interests, with potential extensions. The Dow Jones License Agreement has an initial term until June 30, 2026, and automatically renews for five-year periods thereafter, provided there is open interest in products based on the licensed indexes. This provides long-term visibility for products based on these indexes.

Does CME Group have the ability to grant sublicenses?

Yes, both the S&P License Agreement and the Dow Jones License Agreement provide CME Group (and its subsidiaries like CBOT) with certain rights to sublicense its rights to third-party exchanges or organized trading facilities located outside of the United States. This provision offers potential for expanding the reach and trading of derivative products based on these indexes globally.

CME 8-K: Material Agreements

Summary

This 8-K filing from CME Group Inc. (CME) on July 6, 2012, primarily announces the consummation of the formation of S&P/Dow Jones Indices LLC, a joint venture with The McGraw-Hill Companies. This significant event establishes a new entity that will manage and leverage prominent stock market indices. For investors, this means CME Group has solidified its strategic position in the index business, which is crucial for derivative product development and trading. The filing details the licensing agreements that underpin this joint venture, granting CME Group and its subsidiary, CBOT, exclusive and non-exclusive rights to use various S&P and Dow Jones stock indexes for creating and trading futures, options, and other derivative contracts. The terms of these licenses, including fees, durations, and sublicensing rights, are key considerations for understanding the future revenue streams and operational flexibility of CME Group related to these popular benchmarks.

Key Highlights

1CME Group Inc. has successfully consummated the formation of the S&P/Dow Jones Indices LLC joint venture with The McGraw-Hill Companies, Inc.
2This joint venture integrates CME Group's index services with McGraw-Hill's S&P Indices, creating a major player in the index business.
3CME Group has secured a new S&P License Agreement, granting it rights to use S&P stock indexes and trademarks for derivative contracts.
4The S&P license includes exclusivity for futures and options on futures for most S&P stock indexes, with the S&P 500® Index having exclusive rights for a significant period.
5CBOT, a CME Group subsidiary, has a Dow Jones License Agreement providing rights to use key Dow Jones stock indexes for derivative products, with initial terms extending to 2026.
6These licensing agreements involve quarterly fees based on profits for the S&P license and per-trade fees for the Dow Jones license.
7CME Group has obtained sublicensing rights under both agreements for certain international markets, potentially expanding its global reach.

CME GROUP INC. 8-K Report, Material Agreement (Jul 6, 2012)

Summary

Key Highlights

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