Chicago Merc to Cut Currency Futures Trading Fees (Update1)
2005-10-05 12:33 (New York)
(Adds comment from Eurex US CEO in fourth paragraph; comment
from Merc spokeswoman in ninth paragraph.)
By Ann Saphir
Oct. 5 (Bloomberg) -- The Chicago Mercantile Exchange, the
biggest U.S. futures market, will cut currency futures trading
fees for hedge funds and commodity trading advisers by more than
half to keep customers from switching to competitor Eurex AG.
Funds with at least $50 million under management and trading
more than 125,000 currency contracts a month will pay 60 cents a
contract, down from the current $1.60, the exchange said in a
statement. The discount starts Nov. 1 and will run for nine
months.
Eurex US, the Chicago-based unit of the world's biggest
futures market, began offering contracts tied to the euro, yen,
Swiss franc, pound, and Australian and Canadian dollars on Sept.
23, using cheaper fees as its main draw for customers. Eurex US is
waiving fees to the end of the year and will then charge 56 cents
a contract, including clearing.
``They have clearly reacted to what we did,'' Satish
Nandapurkar, chief executive of Eurex US, said in a telephone
interview from New York. ``It's the first of many price cuts that
you'll see from the CME, and we're prepared for that.''
Chicago Merc shares fell $5.17, or 1.5 percent, to $335.05 at
11:35 a.m. in New York Stock Exchange composite trading.
The face value of the Merc's contracts are half or less than
that of Eurex's contracts, making it twice as expensive to trade
the same amount of currency, even with the discounts.
``We are continuously looking at ways to keep CME futures
competitively priced,'' Rick Sears, the Mercantile Exchange's
managing director of foreign exchange products, said in the
statement.
Trade Inducement
The discount is designed to induce more trading, said Pamela
Plehn, a Chicago Mercantile Exchange spokeswoman.
Asked whether the price cuts were a response to competition
from Eurex, she said, ``Clearly, we are aware of what our
competitors are doing, but we always are looking at how we can
keep our products competitive.''
Eurex US this year stopped marketing Treasury futures after
failing to win market share from the Chicago Board of Trade, which
cut its trading fees just days before Eurex US started.
While the Board of Trade had a near monopoly on Treasury
futures trading, the Chicago Merc's business makes up just 2
percent, or $43 billion, of daily world currency trading. Eurex
handled $227 million in currency futures on Oct. 3, the most
recent date for which data is available.
Both exchanges compete with trading in the off-exchange
currency markets, which makes up the bulk of the $1.9 trillion in
foreign exchange traded each day.
Because currency traders are used to trading in more than one
marketplace, Chicago Merc's price cuts may actually help boost
business at Eurex, Nandapurkar said.
``As we continue to grow, the marketplace realizes that
having an alternative venue is the way you get price cuts,'' he
said. ``The best way for the marketplace to turn this into
permanent pricing is to support us.''
2005-10-05 12:33 (New York)
(Adds comment from Eurex US CEO in fourth paragraph; comment
from Merc spokeswoman in ninth paragraph.)
By Ann Saphir
Oct. 5 (Bloomberg) -- The Chicago Mercantile Exchange, the
biggest U.S. futures market, will cut currency futures trading
fees for hedge funds and commodity trading advisers by more than
half to keep customers from switching to competitor Eurex AG.
Funds with at least $50 million under management and trading
more than 125,000 currency contracts a month will pay 60 cents a
contract, down from the current $1.60, the exchange said in a
statement. The discount starts Nov. 1 and will run for nine
months.
Eurex US, the Chicago-based unit of the world's biggest
futures market, began offering contracts tied to the euro, yen,
Swiss franc, pound, and Australian and Canadian dollars on Sept.
23, using cheaper fees as its main draw for customers. Eurex US is
waiving fees to the end of the year and will then charge 56 cents
a contract, including clearing.
``They have clearly reacted to what we did,'' Satish
Nandapurkar, chief executive of Eurex US, said in a telephone
interview from New York. ``It's the first of many price cuts that
you'll see from the CME, and we're prepared for that.''
Chicago Merc shares fell $5.17, or 1.5 percent, to $335.05 at
11:35 a.m. in New York Stock Exchange composite trading.
The face value of the Merc's contracts are half or less than
that of Eurex's contracts, making it twice as expensive to trade
the same amount of currency, even with the discounts.
``We are continuously looking at ways to keep CME futures
competitively priced,'' Rick Sears, the Mercantile Exchange's
managing director of foreign exchange products, said in the
statement.
Trade Inducement
The discount is designed to induce more trading, said Pamela
Plehn, a Chicago Mercantile Exchange spokeswoman.
Asked whether the price cuts were a response to competition
from Eurex, she said, ``Clearly, we are aware of what our
competitors are doing, but we always are looking at how we can
keep our products competitive.''
Eurex US this year stopped marketing Treasury futures after
failing to win market share from the Chicago Board of Trade, which
cut its trading fees just days before Eurex US started.
While the Board of Trade had a near monopoly on Treasury
futures trading, the Chicago Merc's business makes up just 2
percent, or $43 billion, of daily world currency trading. Eurex
handled $227 million in currency futures on Oct. 3, the most
recent date for which data is available.
Both exchanges compete with trading in the off-exchange
currency markets, which makes up the bulk of the $1.9 trillion in
foreign exchange traded each day.
Because currency traders are used to trading in more than one
marketplace, Chicago Merc's price cuts may actually help boost
business at Eurex, Nandapurkar said.
``As we continue to grow, the marketplace realizes that
having an alternative venue is the way you get price cuts,'' he
said. ``The best way for the marketplace to turn this into
permanent pricing is to support us.''