Eurex vows to launch US exchange

M

McCloud

Eurex vows to launch US exchange
By Jeremy Grant in Chicago FT.com
Published: January 10 2003 0:29 | Last Updated: January 10 2003 0:29

Eurex, the German-Swiss derivatives exchange, on Thursday night said it would launch a derivatives exchange in the US in an immediate response to rejection by the Chicago Board of Trade of Eurex as the sole provider of a new electronic trading platform.

The development marks the opening of hostilities between Europe's largest derivatives exchange and its rivals in the US and the start of Eurex's ambitious moves to gain a foothold in the world's largest derivatives market.


It is also a victory for Euronext-Liffe, the London-based derivatives exchange, over its continental European rival. It has been battling for months to persuade the Chicago Board of Trade to switch to using its Liffe-Connect electronic trading system from an existing arrangement under which it leases a Eurex system known as a/c/e/.

The CBOT decided at a board meeting to choose Liffe-Connect and not to continue leasing a/c/e after January 2002, when the current arrangement expires.

The decision to reject Eurex will come as a surprise because most observers had thought that the Chicago exchange would stick with the a/c/e system. Rejection of the Eurex system turns Eurex into a significant threat because it will now be allowed to compete head-on for the first time with the CBOT's core US dollar interest rate futures products.

"We're going to launch our US exchange and expand our existing product base to include product on US underlying [indexes and equities]," Rudi Ferscha, Eurex chief executive, told the Financial Times.

"We've been in advanced talks with US regulators for this launch. We will continue to use the a/c/e infrastructure with the new exchange and leverage it," he said
 
Eurex vows to launch US exchange
Published: January 10 2003 0:29

The CBOT decided at a board meeting to choose Liffe-Connect and not to continue leasing a/c/e after January 2002, when the current arrangement expires.
More...
I am thinking they are meaning January 2003. 2002 was last year.

We iss launching Eurex in USA und you iss liking it, ya? We are having an A/C/E up our sleeve. Soon iss you knowing what happens when wurst koms to wurst!
 
The CBOT will begin to implement LIFFE Technology in November 2003 for some products, but the major Interest rate contracts will not begin to trade until Jan. 2004.

This strategy is going to start a war among the Chicago Exchanges as well as the rift is has made between the CBOT and Eurex.

LIFFE technology is currently the only Matching System that effectively handles STIR product strategies effectively. The Eurodollar is still the King product at the CME and they are only now trying to introduce an up to date electronic trading system for this product. This alliance will force the CME to move quicker and become more competitive in its fee structure, because the CBOT should list the Eurodollars on their platform. This will benefit everyone in the long run, because the large institutions will be able to Trade the entire Interest Rate curve on one Exchange with one Clearing Corporation. In addition, the Chicago Exchanges will all have to get more efficient and they will have to let Market forces choose what is the best method of trading futures. I think that everyone knows that trading Futures Electronically broadens the reach of the user and is more cost effective in the long run.

If you are trading on the exchanges, find a Bunker to watch the Battle.
This is going to get interesting!
 
Eurex, the international derivatives market is expanding its existing U.S. business to include products based on U.S. underlyings. On Thursday, the company announced plans to launch a registered U.S. exchange operated under U.S. regulation in order to offer a full range of derivatives on U.S. interest rates, indexes and equities. It said it has been in advanced talks with regulators and market participants to prepare this launch. Through the new U.S. exchange Eurex adds another step to its successful global growth strategy by directly entering the market based on U.S. underlyings thereby expanding its global benchmark range into U.S. products.

This move was started with the restructuring of the a/c/e alliance with the Chicago Board of Trade (CBOT) in July 2002: Eurex and CBOT had agreed to shorten the remaining term of the a/c/e alliance from October to January 2004 and to eliminate by the same date all product and co-operation restrictions previously in place until 2008. This liberates Eurex to fully compete in the U.S. market in all products and to establish new partnerships. Eurex CEO Rudolf Ferscha said: "Eurex will offer a full range of U.S. fixed income, equity and index products to customers worldwide in early 2004."

Eurex has developed and operated the successful a/c/e trading platform which trades more than 70 percent of all U.S. bond futures already. a/c/e and Eurex utilize the same trading platform and the global Eurex network. Eurex will continue to use this infrastructure for the new exchange. Currently a/c/e has over 150 members linked to the system and out of the 430 Eurex members 72 are based in the U.S. In 2002 a total of 130 million contracts were traded on a/c/e, making it the second largest electronic platform in the U.S., and 801 million contracts changed hands on Eurex, the world´s largest electronic market.

With the launch of the new exchange customers will benefit from a market model that establishes a level playing field for all participants as well as open access, seamless integration of OTC market and a low cost pricing structure. These features have helped Eurex to develop the European market in bond futures from a level of 35 percent of the U.S. market in 1997 to 170 percent in 2002, creating unprecedented levels of access and liquidity. Since all products and services will be available through existing infrastructures, customers will be able to use them without migration costs. Rudolf Ferscha emphasized: "Our customers worldwide will be able to leverage their existing Eurex and a/c/e infrastructures to benefit from low cost open access to the full range of U.S. and European products."

Eurex currently operates the world's most liquid fixed income markets, with 450 million contracts traded in the 2, 5 and 10 year euro interest rates. At the same time, Eurex is the leading exchange in European index products with a market share of over 70 percent. Furthermore, in the equity options business Eurex has traded contracts with an underlying value of 583 billion in 2002, making it the largest equity options market worldwide.

( Frankfurt/Main, 10 Jan 2003 )
 
"Euronext-Liffe the London-based derivatives exchange" ? Yeah they forgot to say that now it is french :D

What a comedy of competition. 2 years ago judge found by pure hasard that derivatives market on french bonds were manipulated by the official exchange with fictive transactions and they pretext competition and that Spain and German do so. To be more clear the bubble could have been orchestrated. This story has been discussed for a few weeks in an important french financial newspaper but I never saw any following. The judge should have been asked to shut up :)

Quote from McCloud:

Eurex vows to launch US exchange
By Jeremy Grant in Chicago FT.com
Published: January 10 2003 0:29 | Last Updated: January 10 2003 0:29

Eurex, the German-Swiss derivatives exchange, on Thursday night said it would launch a derivatives exchange in the US in an immediate response to rejection by the Chicago Board of Trade of Eurex as the sole provider of a new electronic trading platform.

The development marks the opening of hostilities between Europe's largest derivatives exchange and its rivals in the US and the start of Eurex's ambitious moves to gain a foothold in the world's largest derivatives market.


It is also a victory for Euronext-Liffe, the London-based derivatives exchange, over its continental European rival. It has been battling for months to persuade the Chicago Board of Trade to switch to using its Liffe-Connect electronic trading system from an existing arrangement under which it leases a Eurex system known as a/c/e/.

The CBOT decided at a board meeting to choose Liffe-Connect and not to continue leasing a/c/e after January 2002, when the current arrangement expires.

The decision to reject Eurex will come as a surprise because most observers had thought that the Chicago exchange would stick with the a/c/e system. Rejection of the Eurex system turns Eurex into a significant threat because it will now be allowed to compete head-on for the first time with the CBOT's core US dollar interest rate futures products.

"We're going to launch our US exchange and expand our existing product base to include product on US underlying [indexes and equities]," Rudi Ferscha, Eurex chief executive, told the Financial Times.

"We've been in advanced talks with US regulators for this launch. We will continue to use the a/c/e infrastructure with the new exchange and leverage it," he said
More...
 
Mon April 21, 2003 04:16 PM ET
By Rosalind Krasny

CHICAGO, April 21 (Reuters) - The expected arrival in the United States early in 2004 of
Eurex, the brash German-Swiss exchange that has surged to No. 1 in world futures trade, is
threatening to shake up the clubby world of Chicago exchanges.

The Chicago Mercantile Exchange and Chicago Board of Trade -- Nos 2 and 3 in world
futures volume -- have bickered in the past. In practice, they prospered by not competing with
each others' contracts. Eurex may end that cozy era.

"The end game is to wrestle these financial markets away from Chicago," said one CBOT
director.

Speculation abounds about whether Eurex will enter the fray by buying an existing exchange,
starting a new one, or some combination of the two.

Since announcing in January it would set up shop in the United States in early 2004, Eurex
has been cagey about revealing specifics. But industry watchers think details will start to
emerge very soon.

The first step could be for it to hook up with the Board of Trade Clearing Corp., the entity that
has been clearing CBOT trades for 77 years. The CBOT last week said it was forging a
clearing arrangement with the CME, a move that many in the industry believe was prompted
by the threat of Eurex establishing a clearing link with BOTCC.

Industry sources said Eurex has been in talks with BOTCC about a clearing link for years and
could unveil a deal soon.

BUY AN EXCHANGE?

Once Eurex establishes a link to clear its trades, the next step could be to buy an exchange,
industry sources said. A prime candidate would be the BrokerTec Futures Exchange and
BrokerTec Clearing Co. of Jersey City, New Jersey, allowing Eurex to inherit a relationship with BOTCC and
possibly tip-toe through a regulatory minefield.

BrokerTec, a Wall-Street-backed, all-electronic exchange that lists financial futures such as U.S. bonds, grew
out of frustration with the CBOT and its commitment to an open-outcry trading floor. Eurex also is all-electronic.

Despite its blue-chip pedigree, BrokerTec has made few inroads on CBOT's franchise. Its trading volume in
March was 182,950 contracts. CBOT 10-year note futures, alone, traded an average of 539,073 contracts a
day in March.

BrokerTec has outsourced clearing and processing services to BOTCC since trading started in November
2001.

Now, a BrokerTec board member, Michael McErlean, is joining Eurex's management team-in Chicago.
McErlean was formerly global co-head of futures at Goldman Sachs, and once a colleague of Rudolf Ferscha,
Eurex's CEO.

Sang Lee, analyst at Celent Communications, a research advisory firm in Boston, said a Eurex acquisition of
BrokerTec has been one of several rumored strategies.

"It is not easy to gain exchange status in the U.S.; it is much easier to buy someone (already) in the
marketplace," Lee said. "Eurex being fully electronic and BrokerTec being fully electronic, it would probably
make sense."

The CBOT board member said Goldman Sachs and the big New York houses have pushed Eurex to buy
BrokerTec and hook up with BOTCC to advance their electronic trading agenda.

NO REAL COMPETITION

Until now CBOT, CME and Eurex have tended to circle each other warily but each controlled their own piece of
the lucrative global interest rate futures pie.

CME Eurodollars is the world's most active rate futures contract, while the CBOT trades futures on the U.S.
yield curve from 30-day Fed funds to 30-year Treasury bonds.

Eurex trades the German yield curve from one month to 30 years and the Swiss curve from 8 to 18 years.

In a rare case of competition over a specific futures contract, Eurex, formed in 1998, quickly won the battle for
the large German Bund futures contract with London-based LIFFE.

Eurex won the battle of the Bunds with low transaction costs and an electronic trading platform -- a strategy it is
expected to repeat in the United States.

Industry sources have suggested other ways Eurex could launch in the U.S. derivatives market. Earlier this
year, Eurex posted on its Web site -- and then quickly withdrew -- a draft plan for a U.S. options exchange.
Eurex said the posting was made in error and was for "consultation purposes" only.

Last week, Eurex reiterated that its planned U.S. exchange would offer "a full range of derivatives on U.S.
interest rates, indexes and equities." Eurex said talks with market participants and U.S. regulators were
"advanced."

An options industry source said that Eurex has "definitely been looking at purchasing one of the smaller
exchanges."

Spokesmen for BrokerTec, BOTCC and Eurex had no comment on any possible deals. (Additional reporting
by Doris Frankel)
More...
www.reuters.com/financeNewsArticle.jhtml?type=mergersNews&storyID=2598976
 
Derivatives exchange Eurex, part-owned by Deutsche Boerse AG , is in merger or alliance talks with the Intercontinental Exchange, a U.S.-based online trading platform and owner of London's International Petroleum Exchange (IPE), industry sources said on Tuesday. "There are talks with the InterContinental Exchange (ICE) in Atlanta, which has put itself up for sale," one source said. The source said Eurex -- the world's biggest derivatives exchange -- was also in talks with U.S.-based all-electronic exchange BrokerTec Futures Exchange. A spokesman for Eurex, jointly owned by Deutsche Boerse and the Swiss Stock Exchange, declined to comment. In Atlanta, International Exchange spokeswoman Kelly Loeffler said she had no knowledge of such talks. "It's the first I've heard about it. It sounds like a rumour."

ICE, owned by a consortium of banks and energy companies, operates an online trading platform for energy and metals products. It bought the IPE, Europe's leading energy futures and options exchange, in mid-2001.

Speculation over Eurex's U.S. expansion plans have intensified in recent weeks after the Swiss-German exchange said at the start of the year it planned to set up an exchange in the United States from 2004 to expand its share of the lucrative U.S. derivatives market.

Eurex's previous U.S. link-up with the Chicago Board of Trade (CBOT) ended after the CBOT opted to change to rival Euronext's LIFFE Connect electronic trading system after 2003. Analysts said a takeover or merger with an existing exchange would ease Eurex's entry into the United States.
More...
 
Not exactly a new story, but while we are on the subject:

Eurex May Buy BrokerTec Futures Exchange, People Say (Update2)
2003-04-30 11:48 (New York)

Eurex May Buy BrokerTec Futures Exchange, People Say (Update2)

(Adds comment from analyst in fifth paragraph.)

Frankfurt, April 30 (Bloomberg) -- Eurex AG, the world's
biggest futures exchange, may buy BrokerTec Futures to compete
with the Chicago Board of Trade in contracts tied to U.S.
government debt, people familiar with the situation said.
An agreement between the two all-electronic exchanges could
be reached in as little as a month, one person said.
Frankfurt-based Eurex said in January that it would offer
futures and options tied to U.S. fixed income, equities and equity
indexes next year. Buying BrokerTec would allow Eurex to offer
such contracts without having to go through the costs and
regulatory paperwork to start its own exchange.
Eurex spokesman Uwe Velten said the exchange would ``never
comment on speculation.'' BrokerTec Futures declined comment
through spokesman Bill Ferri of Intermarket Communications.
``Buying another exchange would make things much easier to
get the business set up,'' said Alexander Plenk, an analyst at
Bankgesellschaft Berlin AG in Berlin. ``Their other alternative is
to set up their own exchange from scratch, which means meeting all
the SEC requirements, which is very cost- and time-intensive.''
Owned by 14 Wall Street banks including Goldman, Sachs & Co.
and Morgan Stanley & Co., BrokerTec Futures ranks among global
derivatives exchanges just above the Budapest Commodity Exchange
and below the Winnipeg Commodity Exchange by number of trades.
BrokerTec Futures is a subsidiary of BrokerTec Global LLC,
which sold its bond-trading business to ICAP Plc for $240 million
earlier this year. U.S. regulators cleared the purchase last week.

Competition

Trading in futures on five- and 10-year notes and 30-year
bonds at the Jersey City, New Jersey, exchange more than doubled
in March to 182,950 contracts. That compares with an average
538,000 trades a day in 10-year note futures at the Chicago Board
of Trade.
Eurex may boost those numbers by lowering fees and making it
easier to trade there, futures brokers said. Futures are agreements
to buy or sell an asset on a set date at a certain price.
``If Eurex were to come in to the U.S and offer a number of
products and help provide liquidity at a lower cost, we would
certainly entertain using them,'' said Allan Zavarro, executive
vice president at ABN Amro Holding NV. ABN will meet with Eurex in
coming weeks to talk about its U.S. plans, he said.
Eurex is discussing processing transactions through the Board
of Trade Clearing Corp., which handles BrokerTec Futures trades.
Eurex is owned by Deutsche Boerse AG, operator of the Frankfurt
stock exchange, and the Swiss Exchange.
The Board of Trade, the second-biggest U.S. futures market,
has offered $207 million to buy the Board of Trade Clearing Corp.,
which has handled its transactions since 1925. CBOT President
Bernard Dan said in March that he wasn't comfortable with BOTCC's
clearing trades for other futures exchanges. The Board of Trade
earlier this month agreed to have all its transactions cleared by
larger rival Chicago Mercantile Exchange starting next year.
Eurex could turn to the Options Clearing Corp., which handles
trades from all five U.S. options markets.

--Ann Saphir in the Chicago newsroom, (1) (312) 692-3749 or at
with Tom Kohn and Mark Gilbert in London.
Editor: Maguire
 
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