CME plans to grab market share with currency futures exchange

Tim Wallace
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A NEW derivatives exchange is set to break open the dominance of the NYSE Euronext’s Liffe and Deutsche Bourse’s Eurex, industry experts forecast yesterday.

CME announced its plans to establish the new exchange by the middle of next year, beginning in foreign exchange futures and potentially expanding into areas including interest rates and metals.

It is applying for a Recognised Investment Exchange licence from the FSA, to whom it will need to prove it has the proper systems, controls and personnel in place – a process that typically takes from six months to a year.

Steve Grob from Fidessa believes the firm could well establish a strong position in the market.

“This is a significant move as CME tries to enter a sector historically dominated by Eurex and Liffe,” he told City A.M.

“By starting with currency futures, they are extending their successful US franchise. CME can build that up, and later try to go into the interest rate business, and expand from there.”

Grob added that the competition could also push regulators to try to open up the market in derivatives, for example by making one exchange’s contracts comply with another’s systems, allowing customers more choice.