EurexUS, will it work?

Talked with Eurex US today.


The market making program for the interest rate products is closed to 20 MM in August. They are still going to distribute 5 Million dollars proportionally to the traders who do 1000+ per day for 15/20 trading days per month. Next year it will be 20% of profit sharing to same group. This is in addition to the fee holiday.

I have no news on the programs for the ER2 but I would expect that they are going to be even more aggressive.


Jay

 

Yeah... the current incentive program is pretty sweet. Looking at the DOM though, I think it is just a bunch of machines in there arbing the CBOT. It doesn't trade intuitively... just a bunch of bid and asks and cancels throughout the day.

 

Yeah, lets go trade a market without liquidity. Eurex US is a joke for now in terms of offering a real market. The CBOT has loyal customers and as long as the fees remain low the customers will continue to trade there. Furthermore, once the floor has closed down or is condensed into a smaller version the CBOT will have a huge expense off its back.

 

I'm a member of the CBOT. Any comments I would make about traders being loyal customers would be as sarcastic as your remark about trading a market without liquidity. A loyal trader is one who will not accept change when it happens (the definition of loyalty) and, therefore, will wither away as markets will perpetually develop and change.

A trader will go where his cost is lowest and potential is highest. If it takes a EurexUS to make bond fees as low as they are at the CBOT, then so be it.

I only discuss EurexUS here because I'm always on the lookout for the next "thing" for my traders and I. I don't care where it comes from or whatever. I don't even care if it succeeds or fails. I'm just interested in what it has to offer.

Maybe there will be a guy or 2 left in the pits or behind the screen when everyone else has moved on to the next thing, but that guy is just holding on to memories. It is just part of the business and that is why we are discussing Eurex US here.

If that goes counter your beliefs and you feel that this exchange should fail, then it would make sense to support (or start) those threads that are bullish on CBOT.

As far as I'm concerned, I'm bullish/bearish on whatever is going up/down right now. That is why I scalp and others like to swing trade. There is no right or wrong, it just is. I respect your views.

Cheers.

 

Futurestrader71,

I agree. I do not believe in good markets or bad markets only markets that are going to make ME money!!

I have been around this business now for ten years. My cost over the last three have went down substantially. Especially, in the last year. I have always liked the Cbot. I have good experiences there. With that said. Thank god for Eurex and Eurex USA!

 

Russell on EurexUS has been delayed. They say they are focusing more on options now. I think this is a mistake. The Russell is very expensive on CME. Making it available on EurexUS at a fee competitive with the CME member fee would have generated a huge amount of volume for EurexUS. Anyway.... that's the news. No Russell on EurexUS by the end of this month as previously indicated.

 

They are stupid! I am making calls. I was planning on EurexUSA coming out with the ER2. I do not care if it worked one way or another. However, I know from what happened with the Cbot. If Eurex USA brings them out my costs at the CME will go down! This is the positive. Every trader has leverage over the CME. But only if I and everyone else has a new venue to trade it!!

I hope the ER2 grows as much over the next year as it did over the last! To me it moves like the Dax with all the little rips! Just not as big.

 

I wholeheartedly agree with you. They are trying to bring volume to the exchange and they have an opportunity with the ER2 because it is not under contract like the DOW, S&P and NASDAQ. They could easily generate 60,000 contracts per day for the exchange from this contract alone. That's more than all the current products combined.

Silly decision....but then again, I don't know why it fell through. I am placing a call to an upper level manager at Eurex who has been helpful in the past. I will try to find out what the problem is. I was looking forward to this contract.

 

elease: #5014-04
For Release: October 21, 2004

CFTC Permits U.S. Clearinghouse to Clear
European Futures

Washington, D.C. – The Commodity Futures Trading Commission (CFTC) has issued an order permitting implementation by The Clearing Corporation of its plan to have certain transactions executed on a European futures exchange cleared through U.S. futures firms (Futures Commission Merchants or FCMs) and a U.S. clearinghouse. Based in Chicago, the Clearing Corporation is registered with and regulated by the CFTC, as are participating FCMs.

The order addresses clearing in the U.S. of sixteen types of commodity futures and option contracts traded on the Eurex Deutschland exchange, located in Frankfurt, Germany. Those include interest rate futures such as those based on the German government’s Bund, Bobl, and Schatz instruments and futures based on European security indices such as the DAX and the Dow Jones Euro Stoxx and Global Titans indices.

Under the order, cash and securities deposited by a U.S. company or other futures customer with an FCM to margin its positions in those contracts may be carried in the FCM’s customer-segregated funds account under Section 4d of the Commodity Exchange Act. Segregated funds protections include CFTC regulatory restrictions concerning where those funds may be held and how they may be invested, as well as prohibitions against commingling with proprietary funds or use for any other purpose.

With the order, the CFTC has issued an interpretation confirming that the protections of U.S. bankruptcy law, particularly those set forth in Part 190 of the CFTC regulations, will apply equally to the customer positions in the contracts covered by the order and carried in customer-segregated funds accounts.

The order requires the Clearing Corporation to continue to fully comply with the rules and core principles applicable to all clearinghouses under the Commodity Exchange Act, including fulfilling all of its risk management and self-regulatory obligations. The order also requires the Clearing Corporation and every participating FCM to provide to CFTC the same information about customer positions resulting from Eurex transactions as is required about any other position cleared by a U.S. clearinghouse and carried in a customer-segregated funds account.

Acting Chairman Sharon Brown-Hruska stated,

“The Clearing Corporation’s plan to provide clearing services for U.S. and foreign customers of certain European-based futures and options contracts represents a significant and innovative endeavor. The clearing link will foster the development of global markets and bring economic benefits to customers. In addition the link will enhance the Commission’s ability to provide the necessary regulatory protections for customers, firms, and the system as a whole. The arrangement represents an opportunity for customers to work through U.S. FCMs, for customer assets to be held in segregated accounts in U.S. banks protected by CFTC regulations and U.S. bankruptcy law, and for both the Clearing Corporation and participating U.S. FCMs to compete with overseas firms for the business of clearing these transactions.”

http://www.cftc.gov/opa/press04/opa5014-04.htm

 

Nandapurkar: New fee model reflects customer preference for simple, straightforward pricing

Eurex US, the fully-electronic U.S. futures and options exchange, today announced a new pricing structure for U.S. Treasury futures and options on futures. The new pricing, effective January 1, 2005, aims to further reinforce Eurex US as the sustainable low-cost provider in U.S. dollar products and further promote electronic order book trading.

Under the new structure, transaction fees for U.S. Treasury products traded on Eurex US will be priced at U.S. 5 cents per side. All trades executed in the order book are eligible for these fees. Over-The-Counter (OTC) trades will be subject to a surcharge of 45 cents per side.

"After consulting with our customers, we have restructured our fee model to best reflect their request for simple, straightforward pricing," said Satish Nandapurkar, CEO of Eurex US. "We have seen consistent growth in liquidity on the screen, and with this new pricing model we aim to reward our customers for their support. Eurex US continues to be the most competitively priced U.S. futures and options exchange".

Trading volumes and open interest at Eurex US continue to grow, with trading volume setting a new record in November of 1.15 million contracts. Average daily trading volume rose to over 57,000 contracts, up 28 percent from 45,000 contracts in the previous month. Open interest surged to a record level of 79,864 on December 1. With the introduction of Phase Two of the Global Clearing Link, Eurex US will expand its offering to include futures and options on Euro-denominated interest rate and index products. These products will include benchmark European products such as the fixed-income product suite Bund, Bobl and Schatz as well as products on the leading European indices DAX and DJ Euro STOXX 50.