Deutsche Börse, CME Talked—But No Longer

CME Group Inc., CME +0.42% the world's largest futures-exchange operator, has broadened its search for a partner, reaching out to Deutsche Börse AG DB1.XE +0.58% twice in recent months to gauge interest in potential deals, a person familiar with the matter said.

The discussions, which haven't progressed into formal merger talks, illustrate the pressure on exchanges to expand by fusing their operations following a multiyear slide in trading activity.

It also reflects the stepped-up challenge to CME as rivals forge deals to create stronger competition to the Chicago-based company.

Reto Francioni, chairman of Deutsche Börse, has tamped down expectations of a merger, in part because previous attempts were blocked.

Deutsche Börse said in a statement Monday it isn't in merger negotiations with CME Group and is focused on "organic growth."

A spokeswoman for CME declined to comment.

CME's discussions with Deutsche Börse began around the same time as a separate effort last fall by CME to explore a potential deal with NYSE Euronext, NYX -0.32% centered on that company's London futures market, people close to the situation have said. NYSE instead chose to sell itself to commodity-market specialist IntercontinentalExchange Inc. ICE -0.53% for $8.2 billion in a tie-up forming the world's second-largest exchange by valuation.

While CME maintains the biggest overall futures market in terms of volume, activity on its exchanges fell 15% last year, as low and steady interest rates and slackened investor interest in equity investing diminished investors' need to manage risk with CME's futures.

Similar challenges confront Deutsche Börse, a smaller player that runs Europe's biggest futures market from Frankfurt. Volume in its futures contracts fell 19% in 2012, according to figures from the Futures Industry Association.

"The market environment hasn't been ideal for exchanges for a while, and CME has certainly felt the sting," said Gaston Ceron, an analyst with Morningstar Inc. MORN +0.28% "It's not surprising that management would look at ways to jump-start earnings and CME has a history of being a consolidator."

Bloomberg News reported the discussions Monday.

The exchange sector lends itself to deal making, as companies can ratchet up profitability by passing more trades on a single technology platform.

Deutsche Börse Chief Executive Reto Francioni reiterated last week that big mergers and acquisitions aren't currently in the cards, in part because a fresh attempt would be difficult for shareholders to accept, just a year after its previous plans to merge with NYSE Euronext were blocked by the European Union.

CME's approaches to some of its main rivals reflects the scarcity of big futures markets with which to strike deals.

Once traders gravitate to an exchange's products, rivals face great difficulty dislodging the incumbent, because regulations in the U.S. and Europe allow futures markets to restrict trading and clearing of contracts to their own systems