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CME Group to Launch Gold Futures Contract Amid Coronavirus Crisis

Zacks Equity Research

CME Group CME declared the launch of a gold futures contract with expanded delivery options. The options for the new contract sizes include 100-troy ounce, 400-troy ounce and 1-kilo gold bars. The new contract, following the fulfillment of regulatory approval, is projected to be in place by the end of April 2020.

This launch was declared to settle and ease the interruptions to bullion trading caused by the novel coronavirus crisis. CME Group was asked by the London Bullion Market Association and several major banks, which trade gold, to permit the gold bars in London, with the city being the gold storage center.

This new futures contract will be traded on CME's electronic trading platform, Globex and will be subjected to the regulations of Comex in New York. It will also be submitted for clearing via CME ClearPort.

Air travel and precious metal refineries were closed due to the coronavirus outbreak, which created difficulties in shipping the bullion from London to the United States to meet contractual requirements.

With the introduction of this gold futures contract, along with choice of delivery sizes and inter-commodity spreads, customers will have maximum flexibility to control the physical delivery.

CME Group has also shut down its Chicago trading floor temporarily as a precaution to limit large gatherings, which can lead to the spread of the coronavirus.

In the Chicago Board of Trade building, no cases related to coronavirus have been reported so far. The trading floor will remain closed until more medical guidance is available on the coronavirus.

With this declaration, CME becomes the first major U.S. exchange to shut a trading floor to avoid the spread of the coronavirus.

CME Group boasts the largest futures exchange globally in terms of trading volume as well as notional value traded. CME group leads with about 90% market share of the global futures trading and clearing services. The company also remains focused on expansion of futures products in emerging markets, non-transaction related opportunities and OTC offerings.

Shares of this Zacks Rank #3 (Hold) stock lost 7.3% in the past year compared with the industry’s decline of 1%. Nonetheless, the company’s policy to ramp up its growth profile and capital position should continue to drive shares higher.

 

Stocks to Consider

Some better-ranked finance sector stocks from the space are Intercontinental Exchange Inc. ICE, Cboe Global Markets CBOE and MarketAxess Holdings Inc. MKTX, each carrying a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Intercontinental Exchange and Cboe Global Markets surpassed estimates in the last four quarters, delivering positive surprise of 4.28% and 9.49% on average, respectively.

MarketAxess surpassed estimates in three of the last four quarters, the positive surprise being 0.53%, on average.

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