Eurex challenges U.S. futures exchanges
By Ted Jackson, Palm Beach Post Staff Writer
Friday, March 14, 2003
BOCA RATON -- The nation's chief futures regulator said Thursday the Commodity Futures Trading Commission will be examining the issue of foreign exchanges entering the United States.
That's a touchy subject for Chicago's giant futures marts, whose global dominance is increasingly being challenged by upstart overseas players.
"Commissioner Barbara Holum will soon be holding a meeting on various issues, including the commission's policy on foreign exchanges doing business in the U.S.," commission Chairman James Newsome told several hundred delegates at the Futures Industry Association's annual conference.
Newsome did not dwell long on the subject while speaking at the world's premier futures event, which is held annually at the Boca Raton Resort & Club, but competition is an issue uppermost on most people's minds here.
"U.S. exchanges have had their own way for a long time," said John Damgard, president of the Futures Industry Association. "Now someone's coming in and serving notice that they've built a better mousetrap."
Europe's Eurex exchange wowed the futures world in January with an announcement of its intention to challenge the Chicago Board of Trade and its crosstown rival, the Chicago Mercantile Exchange, by opening a U.S. exchange. The move came within hours of a surprise rupture in Eurex's planned U.S. electronic trading joint venture with the venerable Chicago Board of Trade.
Fast-growing electronic trading giant Eurex, which in recent years has overtaken the Merc as the world's largest futures exchange, Thursday underscored its growing might by trading more than 7 million contracts, a new daily record.
And the conference was abuzz with rumors that Eurex might buy U.S. electronic exchange BrokerTec as means of entering the domestic market. BrokerTec has had limited success in its efforts to compete electronically with the Chicago exchanges.
But one thing that Eurex has that BrokerTec didn't is a ready-made deep client base. Eurex says U.S. traders are already familiar with the exchange, accounting for 25 percent of the volume in its European contracts.
"I am regularly asked when Eurex will come to the U.S.," said the exchange's chief executive, Rudolf Ferscha, in a speech Thursday. Ferscha did not answer his own rhetorical question as he looked out at a sea of U.S. futures executives, but Eurex spokesman Uwe Veltan said later on that next January is the target date for its U.S. opening.
"We don't believe in the club philosophy of the U.S. exchanges," Veltan said. "Eurex has a democratic model."
Unlike at the Merc or the Chicago Board of Trade, where prices for exchange seats have at times approached $1 million, anyone can sign up to trade on the Eurex. "All they have to do is fill out an application," Veltan said.
At the core of the competitive issue between Eurex and the U.S. giants is cost.
"It costs $1.25 to trade one contract of the Merc's S&P 500 index futures vs. 23 cents to trade Eurex's leading stock index contract," said the Futures Industry Association's Damgard. "Who do you think is going to have the upper hand over the long run?"
ted_jackson@pbpost.com |
