Eurex vows to launch US exchange

Discussion in 'Index Futures' started by McCloud, Jan 11, 2003.

  1. McCloud

    McCloud

    Eurex vows to launch US exchange
    By Jeremy Grant in Chicago FT.com
    Published: January 10 2003 0:29 | Last Updated: January 10 2003 0:29

    Eurex, the German-Swiss derivatives exchange, on Thursday night said it would launch a derivatives exchange in the US in an immediate response to rejection by the Chicago Board of Trade of Eurex as the sole provider of a new electronic trading platform.

    The development marks the opening of hostilities between Europe's largest derivatives exchange and its rivals in the US and the start of Eurex's ambitious moves to gain a foothold in the world's largest derivatives market.


    It is also a victory for Euronext-Liffe, the London-based derivatives exchange, over its continental European rival. It has been battling for months to persuade the Chicago Board of Trade to switch to using its Liffe-Connect electronic trading system from an existing arrangement under which it leases a Eurex system known as a/c/e/.

    The CBOT decided at a board meeting to choose Liffe-Connect and not to continue leasing a/c/e after January 2002, when the current arrangement expires.

    The decision to reject Eurex will come as a surprise because most observers had thought that the Chicago exchange would stick with the a/c/e system. Rejection of the Eurex system turns Eurex into a significant threat because it will now be allowed to compete head-on for the first time with the CBOT's core US dollar interest rate futures products.

    "We're going to launch our US exchange and expand our existing product base to include product on US underlying [indexes and equities]," Rudi Ferscha, Eurex chief executive, told the Financial Times.

    "We've been in advanced talks with US regulators for this launch. We will continue to use the a/c/e infrastructure with the new exchange and leverage it," he said
     
  2. I am thinking they are meaning January 2003. 2002 was last year.

    We iss launching Eurex in USA und you iss liking it, ya? We are having an A/C/E up our sleeve. Soon iss you knowing what happens when wurst koms to wurst!
     
  3. The CBOT will begin to implement LIFFE Technology in November 2003 for some products, but the major Interest rate contracts will not begin to trade until Jan. 2004.

    This strategy is going to start a war among the Chicago Exchanges as well as the rift is has made between the CBOT and Eurex.

    LIFFE technology is currently the only Matching System that effectively handles STIR product strategies effectively. The Eurodollar is still the King product at the CME and they are only now trying to introduce an up to date electronic trading system for this product. This alliance will force the CME to move quicker and become more competitive in its fee structure, because the CBOT should list the Eurodollars on their platform. This will benefit everyone in the long run, because the large institutions will be able to Trade the entire Interest Rate curve on one Exchange with one Clearing Corporation. In addition, the Chicago Exchanges will all have to get more efficient and they will have to let Market forces choose what is the best method of trading futures. I think that everyone knows that trading Futures Electronically broadens the reach of the user and is more cost effective in the long run.

    If you are trading on the exchanges, find a Bunker to watch the Battle.
    This is going to get interesting!
     
  4. Eurex, the international derivatives market is expanding its existing U.S. business to include products based on U.S. underlyings. On Thursday, the company announced plans to launch a registered U.S. exchange operated under U.S. regulation in order to offer a full range of derivatives on U.S. interest rates, indexes and equities. It said it has been in advanced talks with regulators and market participants to prepare this launch. Through the new U.S. exchange Eurex adds another step to its successful global growth strategy by directly entering the market based on U.S. underlyings thereby expanding its global benchmark range into U.S. products.

    This move was started with the restructuring of the a/c/e alliance with the Chicago Board of Trade (CBOT) in July 2002: Eurex and CBOT had agreed to shorten the remaining term of the a/c/e alliance from October to January 2004 and to eliminate by the same date all product and co-operation restrictions previously in place until 2008. This liberates Eurex to fully compete in the U.S. market in all products and to establish new partnerships. Eurex CEO Rudolf Ferscha said: "Eurex will offer a full range of U.S. fixed income, equity and index products to customers worldwide in early 2004."

    Eurex has developed and operated the successful a/c/e trading platform which trades more than 70 percent of all U.S. bond futures already. a/c/e and Eurex utilize the same trading platform and the global Eurex network. Eurex will continue to use this infrastructure for the new exchange. Currently a/c/e has over 150 members linked to the system and out of the 430 Eurex members 72 are based in the U.S. In 2002 a total of 130 million contracts were traded on a/c/e, making it the second largest electronic platform in the U.S., and 801 million contracts changed hands on Eurex, the world´s largest electronic market.

    With the launch of the new exchange customers will benefit from a market model that establishes a level playing field for all participants as well as open access, seamless integration of OTC market and a low cost pricing structure. These features have helped Eurex to develop the European market in bond futures from a level of 35 percent of the U.S. market in 1997 to 170 percent in 2002, creating unprecedented levels of access and liquidity. Since all products and services will be available through existing infrastructures, customers will be able to use them without migration costs. Rudolf Ferscha emphasized: "Our customers worldwide will be able to leverage their existing Eurex and a/c/e infrastructures to benefit from low cost open access to the full range of U.S. and European products."

    Eurex currently operates the world's most liquid fixed income markets, with 450 million contracts traded in the 2, 5 and 10 year euro interest rates. At the same time, Eurex is the leading exchange in European index products with a market share of over 70 percent. Furthermore, in the equity options business Eurex has traded contracts with an underlying value of 583 billion in 2002, making it the largest equity options market worldwide.

    ( Frankfurt/Main, 10 Jan 2003 )
     
  5. Minime

    Minime

    First time I welcome a foreign invasion.
     
  6. "Euronext-Liffe the London-based derivatives exchange" ? Yeah they forgot to say that now it is french :D

    What a comedy of competition. 2 years ago judge found by pure hasard that derivatives market on french bonds were manipulated by the official exchange with fictive transactions and they pretext competition and that Spain and German do so. To be more clear the bubble could have been orchestrated. This story has been discussed for a few weeks in an important french financial newspaper but I never saw any following. The judge should have been asked to shut up :)

     
  7. bone

    bone ET Sponsor

  8. www.reuters.com/financeNewsArticle.jhtml?type=mergersNews&storyID=2598976
     
  9.  
  10. BND

    BND

    Not exactly a new story, but while we are on the subject:

    Eurex May Buy BrokerTec Futures Exchange, People Say (Update2)
    2003-04-30 11:48 (New York)

    Eurex May Buy BrokerTec Futures Exchange, People Say (Update2)

    (Adds comment from analyst in fifth paragraph.)

    Frankfurt, April 30 (Bloomberg) -- Eurex AG, the world's
    biggest futures exchange, may buy BrokerTec Futures to compete
    with the Chicago Board of Trade in contracts tied to U.S.
    government debt, people familiar with the situation said.
    An agreement between the two all-electronic exchanges could
    be reached in as little as a month, one person said.
    Frankfurt-based Eurex said in January that it would offer
    futures and options tied to U.S. fixed income, equities and equity
    indexes next year. Buying BrokerTec would allow Eurex to offer
    such contracts without having to go through the costs and
    regulatory paperwork to start its own exchange.
    Eurex spokesman Uwe Velten said the exchange would ``never
    comment on speculation.'' BrokerTec Futures declined comment
    through spokesman Bill Ferri of Intermarket Communications.
    ``Buying another exchange would make things much easier to
    get the business set up,'' said Alexander Plenk, an analyst at
    Bankgesellschaft Berlin AG in Berlin. ``Their other alternative is
    to set up their own exchange from scratch, which means meeting all
    the SEC requirements, which is very cost- and time-intensive.''
    Owned by 14 Wall Street banks including Goldman, Sachs & Co.
    and Morgan Stanley & Co., BrokerTec Futures ranks among global
    derivatives exchanges just above the Budapest Commodity Exchange
    and below the Winnipeg Commodity Exchange by number of trades.
    BrokerTec Futures is a subsidiary of BrokerTec Global LLC,
    which sold its bond-trading business to ICAP Plc for $240 million
    earlier this year. U.S. regulators cleared the purchase last week.

    Competition

    Trading in futures on five- and 10-year notes and 30-year
    bonds at the Jersey City, New Jersey, exchange more than doubled
    in March to 182,950 contracts. That compares with an average
    538,000 trades a day in 10-year note futures at the Chicago Board
    of Trade.
    Eurex may boost those numbers by lowering fees and making it
    easier to trade there, futures brokers said. Futures are agreements
    to buy or sell an asset on a set date at a certain price.
    ``If Eurex were to come in to the U.S and offer a number of
    products and help provide liquidity at a lower cost, we would
    certainly entertain using them,'' said Allan Zavarro, executive
    vice president at ABN Amro Holding NV. ABN will meet with Eurex in
    coming weeks to talk about its U.S. plans, he said.
    Eurex is discussing processing transactions through the Board
    of Trade Clearing Corp., which handles BrokerTec Futures trades.
    Eurex is owned by Deutsche Boerse AG, operator of the Frankfurt
    stock exchange, and the Swiss Exchange.
    The Board of Trade, the second-biggest U.S. futures market,
    has offered $207 million to buy the Board of Trade Clearing Corp.,
    which has handled its transactions since 1925. CBOT President
    Bernard Dan said in March that he wasn't comfortable with BOTCC's
    clearing trades for other futures exchanges. The Board of Trade
    earlier this month agreed to have all its transactions cleared by
    larger rival Chicago Mercantile Exchange starting next year.
    Eurex could turn to the Options Clearing Corp., which handles
    trades from all five U.S. options markets.

    --Ann Saphir in the Chicago newsroom, (1) (312) 692-3749 or at
    with Tom Kohn and Mark Gilbert in London.
    Editor: Maguire
     
    #10     May 7, 2003