Standard & Poor's Ratings Services lowered its long-term issuer credit rating on futures exchange company CME Group Inc., saying it was concerned the company might expand its obligations to guarantee customer accounts from losses.
S&P said Wednesday that it was concerned by CME Group's actions after the collapse of MF Global, a commodities firm that failed late last year. After the collapse, CME Group said it would provide a $250 million guarantee to the trustee of MF Global's estate. This month, CME Group said it would start an additional $100 million fund to protect farmers and ranchers from potential losses.
Those two guarantee funds don't present a real risk to CME Group, according to Standard & Poor's. Even if both of those guarantees were full called in, they would only amount to about six months of CME Group's free operating cash flows, the ratings agency said.
What's worrisome to Standard & Poor's is that the guarantees could set a precedent. It could expand the level of guarantee that customers expect when trading volatile commodities contracts.
"CME Group's support of its clearing members' customers expand the firm's long-standing mandate of guaranteeing trades among its clearing members," Standard & Poor's credit analyst Charles Rauch said in a statement.
The agency cut CME Group's long-term issuer credit rating to "AA-" from "AA." The company's outlook is "Negative."
Shares of CME Group gained $6.68, 2 percent, to $282.73 in midday trading.