Eurex Plans to Take Futures Industry by Storm
Tue December 16, 2003 01:56 PM ET
By Ros Krasny
CHICAGO (Reuters) - German-Swiss Eurex will start a global clearing link with Chicago-based Clearing Corp. in March, part of its low-fee plan to take the U.S. financial futures industry by storm, officials with the firms said on Tuesday.
The link, allowing Eurex customers in the United States to clear futures and options trades through Frankfurt-based Eurex Clearing AG, and vice versa, will start on March 28, two months after the planned debut of the Eurex US exchange.
Eurex US remains in regulatory limbo. The Commodity Futures Trading Commission has until mid-March to rule on Eurex's application, although exchange officials are hopeful of approval in time for a Feb 1 start.
Eurex said that once fully implemented, the clearing tie-up will give trading firms savings of more than $2.5 billion through collateral pooling and other margin offsets.
Eurex, the world's largest futures exchange, hopes to reshape the derivatives landscape with its U.S. exchange. Eurex US will offer extremely low trading fees, especially to firms that commit to making markets on the all-electronic exchange.
The clearing link joins two firms spurned this year by No. 2 U.S. futures exchange the Chicago Board of Trade in a venture that initially targets the CBOT's near-monopoly in U.S. Treasury securities futures and options.
Starting March 28, Clearing Corp. customers will be able to hold euro-denominated contracts executed on Eurex's Frankfurt exchange at the U.S. clearing house. Eurex Clearing customers will be able to trade contracts in U.S. dollars at Eurex US but clear them in Frankfurt.
In the second phase, planned for Sep 12, Eurex's European products, including benchmark German interest rate futures, would be cross-listed on Eurex US.
Rudolf Ferscha, Eurex's chief executive officer, said on a conference call that said consultations are "well under way" with U.S. and European regulators to approve the transatlantic tie-up. Eurex Clearing would not need to become a designated U.S. clearing organization, Ferscha said.
"Our opinion is that this is not necessary. We will discuss whatever questions arise with the Commodity Futures Trading Commission," he said.
Much of the regulatory heavy lifting in the United States is likely to be done by the 78-year-old Clearing Corp., formerly the CBOT's clearing partner.
But Clearing Corp. president Dennis Dutterer said the link would not require a "unique approval process" from the CFTC, which regulates U.S. futures trading.
Eurex is jointly owned by Deutsche Boerse and the Swiss Stock Exchange. The CBOT and Chicago Mercantile Exchange, the largest U.S. futures exchange, have lobbied the CFTC and Congress to reject Eurex's plan, prompting Eurex to file an antitrust lawsuit.
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