CME Warns Merger Will Mean Layoffs

The Chicago Mercantile Exchange, which has agreed to merge with the Chicago Board of Trade, has warned employees the deal will result in an unspecified number of layoffs.

In a staff memo, the management of CME said: "We will be evaluating the capabilities and processes of each organization, hoping to combine the best practices of both outstanding organizations. That means there eventually will be job eliminations."

The CME added it cannot guarantee that those affected by job reductions will be eligible for separation benefits. The CME currently employs 1,406 people and the CBOT 768.

The two exchanges did not comment further on the memo.

The CME also cautioned: "Any speculation regarding which roles may change after the merger closes is just that: speculation," but warned employees they "cannot and should not solicit or encourage current CBOT employees to apply for jobs at CME."

The CME added: "There are a lot of decisions yet to be made and many approvals yet to be received before we can begin integrating our two companies."

However, when the Chicago Mercantile Exchange Holdings and CBOT Holdings announced their merger agreement on October 17, they hinted at consolidation in the information technology segment. The two exchanges said the transaction is expected to be accretive to earnings in 12 to 18 months, including pre-tax cost savings of more than $125 million.

The exchanges said they would consolidate their respective floor operations at the CBOT, and consolidate their technology by using solely the CME's Globex platform.

The new company, the $25 billion CME Group, would offer trading on the full slate of U.S. interest rate futures, as well as equity indexes, foreign exchange, commodities, alternative investments and energy. The derivatives trading powerhouse will handle about 9 million contracts a day, with $4.2 trillion in notional value.