After markets closed last night, CME Group Inc. (NASDAQ: CME) announced a 5-for-1 stock split which will be accomplished as a 400% stock dividend. The dividend will be paid on July 20th to shareholders of record on July 10th.

CME Group owns and operates the Comex and Nymex commodities exchanges as well as the Chicago Mercantile Exchange and the Chicago Board of Trade. The company pulled out of the bidding for the London Metals Exchange earlier this week.

CME stated the reason for the split:

We believe that splitting CME Group stock will appeal to a broader, more diverse mix of investor portfolios. By making our shares attractive to more people, we have potential to further expand the base of ownership.

In other words, liquidity. Shares closed yesterday at $256.16 and trade an average of about 600,000 a day. Lowering the share price to around $50 will, CME hopes, attract more investors. Over the past 12 months, CME shares are down about -14%.

CME, as well as the IntercontinentalExchange Inc. (NYSE: ICE), the Depository Trust and Clearing Corp., and Chicago-based OCC (formerly the Options Clearing Corp.) have been designated as systemically important financial institutions. The designation means more regulatory oversight and perhaps larger reserves to withstand a debacle similar to the MF Global implosion.

Paul Ausick

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