CME Europe exchange to target Asia-Pacific market
The CME Group will use its new European exchange as a springboard to the Asian-Pacific markets, with trading hours on the platform extending across the region's trading day, the company's chief operating officer has told Financial News.
The CME Group is one of a handful of large exchanges that is looking to expand eastwards to benefit from growth in the Asia-Pacific markets amid increasing competition at home.
Speaking to Financial News, Bryan Durkin, chief operating officer of the CME Group, said: "We have spent a lot of time building talent, regional expertise, and infrastructure in Europe and bringing an exchange to the region is a natural extension of those efforts. We see an opportunity to leverage that infrastructure in other regimes and Asia is one of those. Clearing and execution located in London will serve a number of regions, including Asia-Pacific."
CME Europe is expected to launch in mid-2013 with 30 foreign exchange futures contracts, 10 of which will provide trading in Asia-Pacific currencies, including the Japanese yen, Korean won, Chinese renminbi and Indian rupee, according a filing with the UK's Office of Fair Trading.
Durkin said CME Europe aims to cover as many of the eastern markets as possible, including the "active" Asia trading sessions. Trading in the new London-based futures contracts will open at 11pm London time and close at 10pm the following day, according to the filing.
The CME Group, the world's largest exchange by market capitalisation, unveiled plans to launch a Financial Services Authority-regulated European exchange in August. The group has spent more than a decade building an overseas business and up to 25% of trading on its Globex derivatives platform, which also trades 23 hours a day, takes place during European trading hours.
However, the creation of a European-based exchange – which is subject to regulatory approval – represents the first time the 'Merc has established a stand-alone operation beyond its domestic US market. Creating a European exchange regulated under UK law will make it easier for the Chicago giant to access customers in Europe and Asia by providing a "higher comfort level", said Durkin
He added that the CME had received a "good deal of interest" from both international firms operating in Asia-Pacific and local domestic Asian firms regarding the new exchange, which he said could provide enhanced coverage of the region with products tailored to local needs. These will ultimately include FX options, interest rate swaps and a broad range of commodities.
The CME Group is one of several exchanges, including NYSE Euronext, Deutsche Börse and the London Stock Exchange, which are attempting to make inroads into the Asia-Pacific markets through a range of joint ventures comprising technology services, consultancy services, and deals to license and share intellectual property.
The CME Group has around 45 staff in the region – across Tokyo, Singapore, Hong Kong and Seoul – in operations, strategy and sales roles. It has also established joint ventures with a number of Asian partners, including derivative listing agreements with the Multi Commodity Exchange of India and the Bursa Malaysia.
Last week, CME Group rivals Deutsche Börse-owned Eurex and NYSE Liffe announced new initiatives aimed at broadening their presence in Asia-Pacific. Eurex unveiled a new pricing and fee regime designed to attract Asia-Pacific firms to its platform, while NYSE Euronext announced memorandum of understandings with the Taiwan Futures Exchange and the Bank of China.
