Edgar Filing: CME GROUP INC.

Definitive Additional Proxy Materials

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

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CME GROUP INC.
(Name of Registrant as Specified In Its Charter)


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On April 25, 2012, representatives of CME Group Inc. (the “Company”) met with representatives of ISS Proxy Advisory Services to discuss the Company’s 2012 annual meeting and related proposals. A copy of the materials from such meeting are attached hereto.

Presentation to ISS:

CME Group 2012 Annual

Meeting

April 25, 2012

•

Enhancements to our Compensation Program

•

Enhancements to our Corporate Governance

Practices

•

Related Party Transactions

Agenda

Enhancements to our

Compensation Program

Since our last annual meeting, we have implemented the following

improvements to our compensation program:

•

Performance

added

our

2011

annual

equity

grants

•

In 2012, we have increased the performance period for such shares from

one

three

years,

linking

the

awards

long-term

performance

•

For 2012, we have added a new long-term performance measure

tied to

three-year growth in our cash earnings on a per share basis

•

For 2012, we have increased from 25% to 50%

the amount of the annual

equity award delivered in performance shares

We Have Enhanced Alignment

of Pay with Performance

Tied to our achievement of 2012 cash earnings and annual total shareholder return

relative to the S&P 500

Cash earnings is the measure we use to evaluate the overall

performance of the

Company and to determine dividend payouts

–

Our CEO’s realized and potential compensation has been aligned with

our performance, measured by total shareholder return year-over-year

on an indexed basis, and we have achieved consistent growth in our

cash earnings.

See pages 40 and 41 of the proxy

statement for more detail

The following table shows the increase in the portion of compensation

tied to cash earnings achievement and total relative shareholder

return

for our named executive officers. We believe the composition of

this

performance-based pay will increase to approximately 50% in 2012

based on the increase in the awards from 25% to 50% of the annual

grant.

26%

39%

74%

61%

20%

40%

60%

80%

100%

2010

2011

Percent of NEOs Target Compensation Tied to Cash

Earnings Achievement and Total Shareholder

Return Relative to the S&P 500

Our short-term incentive program is performance based

and is tied to

our achievement of cash earnings:

•

2010 -

Cash earnings achievement was 110% of target

•

2011 -

Target

increased

11%

vs.

prior

year

actual

cash

earnings

Cash earnings achievement was 101% of target

Bonuses for all of our named executive officers decreased

from 2010

–

•

We believe the ISS peer group should include other financial

exchanges —

such as The NASDAQ OMX Group, Inc. and NYSE

Euronext, who are similarly sized in terms of revenue

Analysis of Pay Relative

to Peers

Ticker

Revenues

Assets

CME

$3.3B

$40.8B

NDAQ

$3.4B

$14.1B

NYX

$4.6B

$13.1B

–

Revenues better reflect the size of financial exchanges where the objective is to collect

clearing and transaction fees which are booked as revenues – not assets

Almost 25% of our assets consist of performance bonds and guaranty fund contributions

in the form of cash that are held as part of our clearing guarantee; our financial

statements include an equal and offsetting liability for the same amount of these assets

Approximately 40% of our assets relates to the intangible value of our trading products,

recorded as a result of our various mergers

Enhancements to our

Corporate Governance

Practices

We Enhanced our

Corporate Governance

Practices

In response to shareholder concerns, we have instituted the

following improvements in our corporate governance:

•

We did not renew our shareholder rights plan and it expired in

accordance with its terms

•

Seeking shareholder approval at the 2012 Annual Meeting to declassify

our Board and move to annual elections as of the 2014 Annual Meeting

•

We are continuously evaluating ways to reduce the size of our Board

while ensuring that we maintain the appropriate expertise, industry

knowledge and skills to effectively oversee our complex, highly regulated

business and it will be reduced by two as of the 2012 Annual Meeting

CME Group received a shareholder proposal from Norges Bank, the

central bank for the Government of Norway, for a binding bylaw

amendment providing for proxy access:

•

Proxy Access Proposal

Ownership

Threshold:

our

outstanding

common

stock

beneficially owned by a shareholder or group of shareholders

Holding

Period:

Continuously

for

year

prior

the

submission

the

nomination with an intention to hold through the meeting date

Maximum

Proportion

Directors

Subject

Nomination:

25%

We believe that ISS should recommend AGAINST

the proxy access

proposal at CME Group for the following reasons:

•

A 1% holder at CME Group is the owner of an investment of less than

$200 million

•

Proxy access combined with our existing Class B shareholder director

election

rights

would

result

40%

our

Board

being

subject

nomination outside of our independent Board Nominating Committee

–

As we move to decrease the size of our Board, this percentage would increase

–

This

could

result

significant

turnover

our

Board

which

other

recipients

the

proposal

are not subjected to

•

We are governed by the CFTC which has additional director

composition requirements we are required to satisfy that do not apply to

other public companies

–

CFTC proposed rules include a mandate that at least 35% of our Board be comprised of

“public”

directors as defined by the CFTC

Proxy Access Proposal

We believe that ISS should recommend FOR

the election of Dennis H.

Chookaszian:

•

In its 2011 advisory report, ISS noted that Dennis Chookaszian serves as a non-

independent member of the Audit Committee

–

Classification based on Mr. Chookaszian’s son being employed by a consultant CME Group has engaged

•

CME

Group

relationship

with

the

consulting

firm

pre-dated

Mr.

Chookaszian’s

service on our Board and his son’s affiliation with the firm

•

After an extensive sourcing process, we independently determined such consulting

firm had the best understanding of our unique business

•

As confirmed

Internal

Audit,

the

fees

charged

are

reasonable

and

available

other

companies

•

Disclosure of a related party transaction in accordance with SEC regulations should not

be a substitute for assessing independence

•

Mr. Chookaszian has extensive experience benefiting the CME Group Board and its

Audit Committee

Related Party

Transactions

In summary, we believe that ISS should recommend that its clients:

Questions regarding CME Group’s annual meeting and the related

proposals may be directed to meg.wright@cmegroup.com

Conclusion

Vote FOR the advisory approval of the compensation of our named

executive officers

Vote AGAINST the binding shareholder proposal for proxy access

Vote FOR the election of Dennis H. Chookaszian