October 14, 2014 / 7:34 PM / 3 years ago

CME to cut 5 percent of global workforce to reduce costs

CHICAGO (Reuters) - CME Group Inc (CME.O) plans to cut 5 percent of its global workforce, or about 150 jobs, to reduce costs with most cuts hitting its technology operations, the world’s largest futures exchange operator said on Tuesday.

The Chicago Mercantile Exchange is pictured March 17, 2008. REUTERS/John Gress

CME’s Chicago headquarters will suffer the majority of the layoffs, although they will affect global offices, a spokeswoman said. Corporate and administrative jobs will be among those eliminated.

CME declined to detail how much money the staff reductions will save the company, which owns the Chicago Board of Trade and New York Mercantile Exchange.

The cuts could add about 5 cents to the company’s earnings per share, said Rob Rutschow, analyst for CLSA

“While the financial impact isn’t huge, the signal it sends is,” he said in a note.

“We have felt that CME as an organization hasn’t paid enough attention to expenses, and this announcement suggests that a greater focus on expenses is possible going forward.”

Shares rose 0.8 percent to $79.65 in afternoon trading after touching a three-week low on Monday. They are up about 1.5 percent for the year.

Executive Chairman Terry Duffy said the job cuts and other expense reductions “will result in decreased costs and reduced management layers, and will help ensure the company’s long-term continued growth.” He added that CME was able to eliminate positions because of new efficiencies in the futures industry.

“Five percent is obviously not nothing,” said Gaston Ceron, equity analyst for Morningstar, about the extent of the layoffs.

“Do I think it will completely remake their expense base in a dramatic way? Probably not, but I think it’ll help.”

The layoffs reflect the weak environment for trading volumes, said Diego Perfumo, analyst for Equity Research Desk.

In July, Chief Financial Officer Jamie Parisi said CME planned to reduce expenses after a 12 percent drop in trading volumes resulted in lower-than-expected second quarter earnings.

Parisi has since said he will retire at the end of the year.

Volumes are running at a record level in early October, according to Sandler O‘Neill, which estimated third-quarter earnings per share at 84 cents. Third-quarter results are due on Oct. 30.

CME will inform employees who are being laid off this week.

The technology staff cuts will not hurt CME’s ability to prevent trading disruptions or fight cyber attacks because the company has “a variety of sophisticated controls to ensure the integrity of our markets,” spokeswoman Laurie Bischel said.

CME’s clearing service for energy and other swaps was hacked last year, and Duffy has said cyber security is a top priority. In August, the company halted trading on its electronic platform for four hours because of a technical issue resulting from software reconfigurations.

Global expansion has also been a focus for CME, which launched its first overseas exchange in London in April after delays.

Senior executives, including CME Clearing President Kim Taylor, last month moved into new global roles.

Reporting by Tom Polansek; Editing by David Gregorio and Cynthia Osterman

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