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September 26, 2017

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CME muscles into Europe with plan for London-based futures exchange

LONDON--CME Group Inc., the biggest U.S. futures market operator, plans to launch a European exchange in a bid to break the duopoly of NYSE Euronext and Deutsche Boerse AG and expand CME's customer base in the process.

The operator of the Chicago Mercantile Exchange, the Chicago Board of Trade and the New York Mercantile Exchange said on Monday it was applying to Britain's Financial Services Authority for approval to open a London-based market offering currency futures in mid-2013.

CME has stakes in several foreign exchanges, but London would be its first solo run in an overseas market. CME's new CEO, Malaysia-born Phupinder Gill, took the reins of the Chicago-based company earlier this year vowing an international perspective for the 164-year-old U.S. futures powerhouse.

"We're talking about a brand new set of clients that would not otherwise trade on CME," Gill said in an interview, referring to the targeted clientele for the proposed exchange. Although CME already offers currency futures in Chicago, "we are not talking about existing clients that are going to shift their business."

Gill said the plan is to add contracts tied to other assets at a later date, but suggested he would be cautious about any direct challenge to NYSE and Deutsche Boerse, whose exchanges dominate trading in European futures. He declined to say how much the new exchange will cost CME, saying only the expense will be similar to that of any startup.

NYSE's Liffe and Deutsche Boerse's Eurex have more than 90 percent of the total world trading in some European contracts, including short-term interest-rate futures in London and bond futures in Frankfurt.

The threat of a monopoly, particularly in futures tied to rates, brought competition authorities to block the planned merger between those exchanges earlier this year.

CME last year listed its own versions of Liffe's short-term rates contracts, but has won few converts.

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