Wed July 16, 2003 06:24 PM ET
By Ros Krasny
CHICAGO, July 16 (Reuters) - The expected showdown between the Chicago Board of Trade and Eurex is fast approaching now that U.S. regulators have approved the common clearing link between the CBOT and the Chicago Mercantile Exchange CME.N .
The green light for the link between the two largest U.S. futures exchanges opens the way for Eurex to finalize terms of its previously announced U.S. clearing relationship with Board of Trade Clearing Corp., the CBOT's clearing partner for over 70 years.
The CME, the No. 1 U.S. futures exchange, will clear about 85 percent of all U.S. futures contracts when it picks up business from the CBOT.
Given the enormity of the change, some were upset that the Commodity Futures Trading Commission approved the link on Tuesday after a public comment period of less than four business days. Often, interested parties get a month or more to submit comments on major rule changes.
Filings on behalf of both Eurex and BOTCC faulted the link on several points. The Futures Industry Association complained about the CFTC's very short public comment period.
And Sharon Brown-Hruska, one of the five CFTC commissioners, took the unusual step of issuing a statement saying that she was worried about the short comment period.
The narrow window might have prevented comments from agricultural firms that will be affected by the transfer of CBOT grain positions to the CME from BOTCC, Brown-Hruska said.
In a statement, the CFTC said the fast approval helped to "enhance legal certainty" surrounding the link "so that all affected parties may make plans as necessary for a smooth and orderly transition beginning in November."
FINAL EUREX PROPOSAL STILL AWAITED
For its part, Eurex, the world's largest futures exchange, has still not completely tipped its hand on specifics of its U.S. exchange, slated to be operational in early 2004.
The BOTCC link will give Frankfurt-based Eurex a U.S. clearing entity, but it still needs to gain designation as a CFTC-regulated futures exchange by partnering with or buying a U.S. exchange, or creating an exchange from scratch. Eurex is a unit of Germany's Deutsche Boerse AG DB.
Industry talk has centered on a full-bore Eurex assault on the CBOT's suite of Treasury futures contracts. But electronic versions of the CBOT's floor-traded grain contracts have also been rumored recently.
Senior Eurex officials met in Washington last week with CFTC staff but did not make an official filing on plans for a U.S. futures exchange, a regulatory source said.
"Last week's visit was not a totally routine courtesy call, but neither was it a presentation of their final proposal," the source said.
"They are such a large entity -- logically they will do their homework and anticipate problems when making their application, There's an anticipatory mood around here, based primarily on what we read in the media," he said.
