Eurex admits defeat in U.S. treasuries, eyes forex

Discussion in 'Index Futures' started by domi93, Jun 22, 2005.

  1. domi93


    By Nieck Ammerlaan and Ros Krasny

    FRANKFURT/CHICAGO, June 16 (Reuters) - European derivatives exchange Eurex admitted on Thursday its bid to break Chicago's dominance in U.S. Treasury futures had failed, in what is the latest blow for leaderless co-owner Deutsche Boerse (DB1Gn.DE: Quote, Profile, Research) .

    Eurex US chief executive Satish Nandapurkar told reporters: "The window of opportunity in Treasuries has passed". The world's biggest derivatives exchange said it would no longer market Treasury products.

    The surrender to Chicago-based rivals CME and CBOT adds another embarrassing episode to Deutsche Boerse's string of woes after irate shareholders in March forced the German exchange operator to drop plans to buy the London Stock Exchange (LSE.L: Quote, Profile, Research) .

    Angered by Boerse's refusal to let investors vote on the plan, a majority of shareholders strong-armed Chief Executive Werner Seifert and Chairman Rolf Breuer into giving up their jobs, leaving Boerse without a strategy or top brass.

    Eurex Chief Executive Rudolf Ferscha said he was not ready to give up Eurex's U.S. presence. Throwing down a new challenge, he said Eurex would launch currency futures in September.

    "We see the reality of the anti-competitive behaviour of the CME and the CBOT," he said, "We are refocusing our resources on FX (foreign exchange) and index products."

    Eurex, co-owned by Deutsche Boerse and the SWX Swiss Exchange, launched Eurex US in February 2004, but failed to live up to claims it would make inroads into the market for Treasury derivatives dominated by the Chicago Board of Trade (CBOT).

    Ferscha said Eurex would continue anti-trust lawsuits against CME and CBOT over what he called predatory pricing.

    Eurex is also targeting the competitors over their alleged efforts to exclude Eurex US from using Clearing Corp as its clearing house and to delay regulatory approval of its U.S. exchange application as well as its Global Clearing Link.


    From September, Eurex will offer futures on the currencies of the Group of Seven industrialised nations, Ferscha said, waiving trading fees for 2005.

    Analysts see the move as Eurex's attempt to take on the Chicago Mercantile Exchange (CME.N: Quote, Profile, Research) , which they estimate holds a 95 percent share of exchange-traded currency-futures volume.

    Currency futures have become an increasingly important, if still small, part of the $1.9-trillion-a-day currency market.

    Average daily volume in CME currency futures was up 82 percent in May from the year before. The exchange traded record volume of 748,050 currency futures and options on June 8.

    "FX is an asset class jumping in volumes ... and volatility. This cannot be overlooked. FX is the big gaping hole in the financial asset categories that Eurex is trading," Ferscha said.

    With the futures, Eurex is trying to draw over-the-counter business onto an exchange platform, a strategy being followed more and more by other exchanges which are seeking to boost volumes to defray operating and developing costs.

    Analyst David Poole at ClientKnowledge in London said there was talk foreign exchange was going more to an exchange model.

    "But I do not think there is hard evidence at the moment, and demand for currency futures is not exploding," said Poole, who is chief operating officer and principal at the research and analytics firm.

    Ignoring the Treasury side could be risky. "You would have thought that people would want to trade Treasuries and forex together as a liquid product," Poole warned.
  2. chisel


    Damn. I guess that means the eCBOT exchanges fees for the treasuries will go back up.
  3. domi93


    I hope not...
    sad news 4 me..:mad: :mad: