I don't think it has anything to do with the ever shrinking traditional futures/options pie. If I had to guess, I'd say they're trying to get into the OTC derivatives/repo clearing in Europe early. This might turn out to be a lucrative business and in Europe it's currently dominated by one large participant. CME is just trying to expand their presence in that space into Europe. I imagine all the FX futures talk is nothing more than an excuse to establish a foothold.
I've been reading about the coming Nasdaq European futures exchange, and also the new fx platforms offered by ICAP and Tradition. (Not exactly breaking news) It will be interesting to see how this plays out. I can't really imagine how Nasdaq would take business from Eurex or what it can offer other than cheap fees for a while. I can't see them excluding RSJ from LIFFE rival products but that would be a great business plan. It's interesting to see all this activity in Europe. Still it makes a change from the exchanges offering yet another failed contract launch. No reason to believe it will be any more successful. What strikes me is the halfwits who run these exchanges with such short term plans.
OTC financial clearing makes the ICE exchange, and ClearPort is just about the only growing profit center for CME. CME does it all, but ICE relies upon the LCH. The exchanges can make several dollars in profit for each OTC swap contract they clear. And just a few cents for a futures contract. I remember that when ICE made a competing bid for the CBOT against the CME, that it was a rude awakening for the Chicago cartel that ICE made several hundred thousand dollars per day clearing swaps - the Chicago boys were wondering how an exchange with such modest futures volume had the capital to bid !
Safer to trade in Europe and Asia than in the USA. Cross Margin only applies to US regulations and is set by the OCC. Europe has much better haircut models... negotiable instruments. 50x1 JBO juice In Europe all funds are held in Customer named accounts. none of this segregated fraud. Volumes are low and us customer faith and confidence with CME is irreparably broken.
In terms of this thread and the title - if you knew the gruesome details about the history of Eurex busting trades, allowing Banks to game the platform and delivery process, and as a result destroying a multitude of independent traders along the way; you would not make such a statement.
do tell. i've never heard any stories of the sort, not challenging it in any way, just havent heard anything of the sort.
Simple question: Why would you set up a JBO in the US and not outside of the US? #1. only 3 choices left in the US: GS, ML or ABN #2. Segregated accounts are a scam. Possession is 9/10 of the law. The practice is only in the US and recovery from fraudsters is near futile. #3. Cross Margin relief / OCC / SEC limits. Very restrictive. #4. Taxes Outside of the US #1. Accounts are held in your name. #2. 200x1 juice available (insane) #3. Cross Margin relief on non OCC approved pairs. #4. Local examining authority trumps SEC/CFTC #5. Taxes deferred until profits are repatriated (if ever) Obviously the list can be swayed by your motives but the major underlying issue is the account trading structure for derivatives in the US is fundamentally flawed and not safe.
I have about 50 overseas clients - and they all set up US futures accounts; even post PFG and MF. And it is entirely their own decision, as it makes no difference to me where they clear provided that they have access to the correct products and that their execution platform supports exchange traded spreads. I am not implying that they do not also have European accounts, just stating how my own clients choose for themselves how to clear futures.