CME readies for Europe, Sefs and the rest of the world

CME readies for Europe, Sefs and the rest of the world


CME chief executive Phupinder Gill has highlighted the exchange’s focus on expanding its global presence, as the group prepares for the launch of its European platform this week writes Jonathan Watkins.

CME Europe is set to go live on September 29 with a suite of FX products as the derivatives giant looks to take its business into Europe’s exchange-traded capital.

Speaking at the FIA Burgenstock expo Gill discussed CME’s ties with Asian exchanges and venues in the emerging markets, but added that a London presence was what the clients had demanded.

“We have been focused on expanding the business by consolidating in the US and outside the US - with the exception of London,” said Gill.

“We have worked with exchanges in different parts of the world – Malaysia, Korea, Brazil and Mexico.

“But what would the client want to see around the world? London is interesting in that there is a demand for the contracts we currently offer.

Competition in the FX market

CME Europe represents the most significant new launch in the London futures market in years and according to Gill they will look to expand their offering to other asset classes in the future.

Also speaking at the FIA event, CME Europe CEO Bob Ray, said the venue would look at what the market needs and what its exposures are.

“We will be definitely looking to Euro-denominated and other currencies,” added Ray.

The now London venue will have competition in the FX market from Europe’s largest derivatives player Eurex.

Eurex FX contracts are set to go live on October 7 in response to CME’s launch which has been long awaited in London.

Emerging markets focus

“We are very excited about this, particularly about client feedback so once it does launch, the proof will be in the pudding.

“It’s going to take time but we’re confident we will see some success.”

CME also has its links with numerous other markets around the world such as Malaysia and Brazil, while Gill added that the exchange – along with the rest of the market – is also keeping their eye on developments in India and China.

In Brazil CME has an agreement to run orders between itself and BM&F Bovespa, South America’s largest derivatives exchange.

A week ago, FOWi reported that CME was looking to increase its staff in the Asia-Pacific region, with the area standing out as holding the key for futures growth in the derivatives market.

Sef applications

“China is not the only place for growth, you have India, Singapore, Hong Kong,” added Gill.

“Look at Brazil there are some interesting things going on there.

“We are confident on a long term basis that Brazil will be a very interesting from a trading perspective.”

“Russia - talking about the black sea wheat contract. Our involvement there has been providing hedging tools to Russian entities.

“In India our involvement has been limited. We have an arrangement with NSE and I believe all these relationships will expand over time.”

“India is a fascinating place but the regulatory environment needs to be developed for us to get involved so now we just have cross-licensing agreements.”

On top of CME’s global quest, the exchange group has also applied with the Commodity Futures Trading Commission (CFTC) to become registered as a Sef.

The move followed its Atlanta-based rivals, ICE, into the new market for the clearing and trading of swaps.

“Are they going to be widely used? Will there be consolidation over time? These things are not sorted out entirely yet.”