Are pit traders looking for jobs yet? CBOT have any chance of erecting political barriers to Eurex's entry? What kind of mkt shr can Eurex expect to swipe?
I think Eurex will have greater market share than the CBOT in the Treasuries within six months after launch. There is no reason to believe that they won't. There are only three main factors that should effect market share results: 1) Technology. Eurex provides the current technology (a/c/e) used on the CBOT electronic contracts. Market players will find it easy to switch to Eurex from a technology standpoint. On the other hand, CBOT will be discontinuing their use of a/c/e later this year, causing headaches for existing CBOT clients that are a/c/e users (this is most of them). 2) Cost. Eurex will be substantially cheaper than CBOT for the same identical service. 3) Status Quo. CBOT will have the advantage here, as market players obviously will need to establish the linkages to Eurex systems to get up and running. I guess we'll all find out soon enough... But, I predict Eurex will be the big winner, just as they were in European futures. -Eric
The pit can't compete, but it can obstruct. (think I'll try one of these new icons) Here is part of an article by the Financial Times Eurex to sue Chicago exchanges for antitrust By Jeremy Grant in Chicago and FT Reporters Published: October 14 2003 19:22 | Last Updated: October 14 2003 19:32 "Tension between Eurex and its two biggest rivals in the US broke out into open warfare last night when the worldâs biggest derivatives exchange sued the Chicago Board of Trade and the Chicago Mercantile Exchange for illegally trying to block its entrance into the US. The suit comes after the CBOT and CME lobbied to have US lawmakers scrutinise Eurex's futures exchange licence application. The Frankfurt-based exchange recently signalled its determination to reshape the US derivatives industry by pledging to establish its long-planned US futures and options exchange by February. The lawsuit shows its frustration with alleged attempts to obstruct the creation of the first transatlantic derivatives operation offering investors in the US almost round-the-clock access to euro and dollar denominated futures"
All I can say is: ain't competition great?! It's we the customers who will benefit. Eurex do have a history of paoching major contracts right from under the nose of another exchange. Anyone remember when the German Bund (doing c. 1 million volume/day) was listed on LIFFE? I don't expect Chicago to be as dopey as LIFFE was in response to this competitive threat, but my prediction is that over time, Eurex will rule the roost. They've got the technology and the prices to do it.
They can't because there is an exclusive contract clause in the contract between the CME and the SP Comstock for the /SP /ND /ES and /NQ. However there isn't for the sp small cap and Eurex have already announced that they will start trading those for starters. They haven't announce when these will start. On the other hand the ISE has already file a complaint with the SEC over index option lockups on the OEX. Stay tuned for the fireworks! Will be the biggest show on earth. Bsulli
We want fireworks. Want competition. Want the CBOT/CME rates to be halved. We want Eurex to come. Will personally welcome them.
There is something very interesting as it relates to the products Eurex plans to launch in the US and the idea of market share. Think about the volume of interest rate futures traded in relation to the volume/size of the cash market for interest rate products. I don't have the exact figures, but. . . . . . they say that the size/volume of the interest rate derivatives market in the US is small in relation to the size of the cash market for bonds and notes. By comparison, the size/volume of the Bund, Bobl and Shatz futures traded on Eurex is much bigger in proportion to the size of the German cash market. Thus, it is quite possible that Eurex could do very big volume in US 30's, 10's and 5's without affecting the volume traded at the CBOT pits and on a/c/e (soon to be replaced by LIFFEconnect). Just a thought. . . . . .
Exactly, and when that starts to happen, what's to stop SP Comstock from deciding to "review" it's exclusive contract with the CME for the SP, ES et al? Or even if they decide to stick with the CME: once the regulators see the huge volume and lower prices created by Eurex in other markets: what's to stop them voiding that contract in the name of fair regulation? Anything is possible. There's obviously a reason why the Chicago boys are running squealing to Washington to try and stop Eurex from coming over. They are clearly worried. Let's just hope the lawmakers don't pander to them. I have this image of Eurex executives coming to Chicago, looking at the trading floor saying: "Ohh, that's what a trading pit looks like!" ..."isn't it quaint?!". By filing lawsuit against Chicago for trying to block their entry, Eurex are clearly not messing around. I agree that the fireworks are only just beginning.