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Shares I love: CME

CME is benefiting from increased use of derivatives
Shares I love: CME
  • CME offers futures and options, and is benefiting from the increased use of these
  • It could also benefit if more bonds are issued

James Harries, manager of Trojan Global Income Fund (GB00BD82KQ40) and Securities Trust of Scotland (STS), explains why he invests in CME (US:CME), the owner of markets including Chicago Mercantile Exchange. Earlier this year, Harries allocated further capital to this company after selling derivatives trading company IG (IGG), as we reported in April (IC, 09.04.21).

“CME offers a wide range of benchmark futures and options based on interest rates, equity indices, foreign exchange, energy, agricultural products to metals, and alternative investment products such as weather and real estate. One of the reasons why I had [orginally] invested in IG was because of the greater use of futures and options. CME is also a beneficiary of this trend as people seek to hedge risk, particularly interest rate risk, in a world where the inflationary expectations are becoming somewhat more untethered. It seems to us that the need to hedge interest rate risk is going to increase and, as governments are spending money with such alacrity at the moment, there will be a need to issue a lot more bonds. CME should benefit from both of those trends, and we were able to buy that company very inexpensively.”

CME was Trojan Global Income Fund’s sixth-largest holding at the end of October, accounting for 4.3 per cent of its assets.

CME has paid paid four ordinary dividends of $0.9 (67p) per share this year – $3.6 in total – an increase on the four ordinary dividends of $0.85 per share it paid last year. However, the total dividend in respect of 2020 amounted to $5.9 due to an extra payment of $2.5 per share.

CME also offers clearing and settlement services for exchange traded and over the counter derivatives through CME Clearing. It owns four exchanges, including designated contract markets CBOT, NYMEX and COMEX. More than three-quarters of its trading volume comes from trades on its CME Globex electronic trading platform.