The Chicago Mercantile Exchange has announced an aggressive 18-month European pricing programme designed to substantially increase the exchange's presence in Europe.
The CME says the incentive programme will significantly reduce total transaction fees on all Globex products for proprietary trading groups and trading arcades located in Europe.
In addition, the Exchange has outlined plans to install six new telecommunications hubs in major European financial centres in an effort to reduce transatlantic communications costs for Globex users across the Atlantic. It builds upon CME's implementation of a London telecommunications hub in 2001, which has increased direct European connections to Globex by nearly 40 intermediaries and end users.
The programme can be seen as a retaliatory strike against Swiss-German derivatives exchange Eurex which is set to launch its own screen-based system in the Merc's backyard.
The price cuts reduce Globex fees to 44 cents per side, amounting to a 69% reduction in costs for the CME's popular eurodollar futures and options contract and a 73% cut in e-FX contracts.
Proprietary trading groups and arcades located in Europe will be eligible for the reduced fees for 18 months upon achieving Globex connectivity, says the CME. Entities that act as brokers for third parties will not be eligible.
CME chairman Terry Duffy comments: "This is the next step in our ongoing effort to expand our global presence and to increase electronic trading in our products."
In Q3 2003, Globex volume was 46% of CME's total volume, and constituted 92% of equity contract volumes and 58% of foreign exchange contract volumes.