CME Subpoenaed by Federal Grand Jury, CFTC on MF Global

Craig Donohue, the chief executive officer of CME Group Inc. (CME) for the past eight years, plans to retire in December when his contract expires at the world’s largest futures exchange.

President Phupinder Gill will replace Donohue, 50, as CEO, the Chicago-based company said yesterday in a statement. Executive Chairman Terrence Duffy will become president and the contracts of both have been extended. Donohue said his decision was unrelated to the failure of one of the company’s customers, MF Global Holdings Ltd. (MFGLQ)

The decision “is one I’ve been working to for quite some time,” Donohue said on a conference call. The need for the firm and industry to deal with the fallout from MF Global’s failure “does not factor in at all in my thinking,” he said.

CME Group, which controls about 98 percent of U.S. futures trading, is the product of some of the largest exchange consolidations. The Chicago Mercantile Exchange’s $9.6 billion purchase of the Chicago Board of Trade in 2007 created CME Group, which then acquired the New York Mercantile Exchange for $7.6 billion in 2008.

“Under Craig’s guidance, CME Group has grown into the preeminent global derivatives exchange company,” Duffy said in the statement. “His many contributions have helped CME transition from a membership-owned organization into a for- profit, public company that has expanded into every major asset class.”

Photographer: Chris Ratcliffe/Bloomberg

Craig Donohue, chief executive officer of CME Group Inc., speaks during a Bloomberg Television interview in London on Jan. 27, 2011. Close

Craig Donohue, chief executive officer of CME Group Inc., speaks during a Bloomberg... Read More

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Photographer: Chris Ratcliffe/Bloomberg

Craig Donohue, chief executive officer of CME Group Inc., speaks during a Bloomberg Television interview in London on Jan. 27, 2011.

Donohue, who became CEO in 2004, joined the company 23 years ago.

‘Bittersweet Decision’

“This is a bittersweet decision for me but I am ready to explore new challenges,” he said in the statement. “I have loved every minute of my time here,” he added later on a conference call with analysts.

CME Group shares fell 2.3 percent to $270.20 as of 4 p.m. in New York, before the announcement which followed the end of regular trading. The stock has fallen 5.3 percent over the past year, assuming reinvested dividends.

MF Global, one of the largest clearing brokers at the company, used about $700 million of customer funds to “meet liquidity issues” at its broker-dealer in the days prior to its October bankruptcy, according to a timeline of events released by CME Group.

Subpoenas

CME Group said it received subpoenas in November from the Chicago federal grand jury investigating MF Global’s failure, as well as the Commodities Futures Trading Commission, according to a Feb. 28 regulatory filing.

The CFTC is reviewing CME Group’s audit of MF Global before the broker’s bankruptcy.

“We believe that we carried out our duties and responsibilities in accordance with these standards and procedures,” CME Group said in the filing.

Gill said on the call that he plans “to continue to drive the company in the same direction,” including opportunities to expand internationally, in over-the-counter instruments and in index services.

The announcement came on the eve of the Futures Industry Association’s annual conference in Boca Raton, Florida.

“Craig is the epitome of the new generation of exchange leaders,” said John Damgard, the former president of the trade group. “Under his leadership, the CME transformed itself into a professionally managed, shareholder-responsive organization that set the standard for the industry.”

To contact the reporters on this story: Jody Shenn in New York at jshenn@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

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