Chicago Merc to Cut Currency Futures Trading Fees (Update1) 2005-10-05 12:33 (New York) (Adds comment from Eurex US CEO in fourth paragraph; comment from Merc spokeswoman in ninth paragraph.) By Ann Saphir Oct. 5 (Bloomberg) -- The Chicago Mercantile Exchange, the biggest U.S. futures market, will cut currency futures trading fees for hedge funds and commodity trading advisers by more than half to keep customers from switching to competitor Eurex AG. Funds with at least $50 million under management and trading more than 125,000 currency contracts a month will pay 60 cents a contract, down from the current $1.60, the exchange said in a statement. The discount starts Nov. 1 and will run for nine months. Eurex US, the Chicago-based unit of the world's biggest futures market, began offering contracts tied to the euro, yen, Swiss franc, pound, and Australian and Canadian dollars on Sept. 23, using cheaper fees as its main draw for customers. Eurex US is waiving fees to the end of the year and will then charge 56 cents a contract, including clearing. ``They have clearly reacted to what we did,'' Satish Nandapurkar, chief executive of Eurex US, said in a telephone interview from New York. ``It's the first of many price cuts that you'll see from the CME, and we're prepared for that.'' Chicago Merc shares fell $5.17, or 1.5 percent, to $335.05 at 11:35 a.m. in New York Stock Exchange composite trading. The face value of the Merc's contracts are half or less than that of Eurex's contracts, making it twice as expensive to trade the same amount of currency, even with the discounts. ``We are continuously looking at ways to keep CME futures competitively priced,'' Rick Sears, the Mercantile Exchange's managing director of foreign exchange products, said in the statement. Trade Inducement The discount is designed to induce more trading, said Pamela Plehn, a Chicago Mercantile Exchange spokeswoman. Asked whether the price cuts were a response to competition from Eurex, she said, ``Clearly, we are aware of what our competitors are doing, but we always are looking at how we can keep our products competitive.'' Eurex US this year stopped marketing Treasury futures after failing to win market share from the Chicago Board of Trade, which cut its trading fees just days before Eurex US started. While the Board of Trade had a near monopoly on Treasury futures trading, the Chicago Merc's business makes up just 2 percent, or $43 billion, of daily world currency trading. Eurex handled $227 million in currency futures on Oct. 3, the most recent date for which data is available. Both exchanges compete with trading in the off-exchange currency markets, which makes up the bulk of the $1.9 trillion in foreign exchange traded each day. Because currency traders are used to trading in more than one marketplace, Chicago Merc's price cuts may actually help boost business at Eurex, Nandapurkar said. ``As we continue to grow, the marketplace realizes that having an alternative venue is the way you get price cuts,'' he said. ``The best way for the marketplace to turn this into permanent pricing is to support us.''
This is great for the 50 million dollar hedge fund, but what about the individual trader.......? I'm ok with tiered pricing and all, but what the CME charges for their FX contracts is crazy.