On Tuesday, CME Group Inc. (CME) announced that it increased its holdings in the Dubai Mercantile Exchange (DME) through a recapitalization plan.
In restructuring DME’s equity shareholding, CME Group’s NYMEX division, which created DME in 2007, will increase its holdings from 25 percent to 50 percent through the agreement. Oman Investment Fund, an Oman sovereign wealth fund, also expanded its holdings to 29 percent in the exchange, up from 25 percent.
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In addition, a subsidiary of Dubai Holding will have a 9 percent holding, down from 25 percent, while 12 percent will go to strategic investors including Vitol, Shell,JP Morgan, Morgan Stanley, Goldman Sachs and Concord Energy, according to a CME press release.
The financial terms of the deal were not disclosed by the exchanges.
In a statement by Ahmad Sharaf, chairman of the Dubai exchange, he said, “We welcome the continued commitment of our partners” and added that “this recapitalization positions the DME to enter the next phase of development for existing and future customers seeking to manage price risk for crude oil markets east of Suez.”
The exchange specializes as a marketplace for the Oman crude oil futures contract, a benchmark to price Middle Eastern oil exports to Asia. It is among the biggest physically delivered oil futures contracts in the world, according to The Wall Street Journal.
In 2011, according to DME, deliveries from the exchange was more than 145 million barrels of crude oil, a 19 percent rise from 2010.
With new capital from CME, it will look to grow the Oman crude oil futures contract. Oman is the largest Middle Eastern oil producer that is not a member of OPEC.
In a statement, Bryan T. Durkin, CME chief operating officer said, “By committing CME Group’s resources and know-how to DME’s increasingly well-received product set, participants in the Middle East and Asia will be able to access transparent pricing and risk management products as global energy markets focus ever further eastward.”
DME is regulated by the Dubai Financial Services Authority and all trades executed on it are cleared by Nymex. The exchange is regulated by the U.S. Commodity Futures Trading Commission.