UK news and information group Reuters and the Chicago Mercantile Exchange (CME) are forming a 50:50 joint venture to establish a centrally-cleared, global foreign exchange marketplace.
FXMarketSpace is being billed as the world's first centrally-cleared global FX marketplace.
Reuters and CME will each contribute capital of up to $45 million to fund the joint venture through to profitability, which is expected during 2008. Each party expects their respective shares of start-up losses to be $20-25 million, with about $5 million in 2006. The venture needs to capture two per cent of the $2 trillion over-the-counter foreign exchange market to achieve break-even.
CME will provide clearing and trade matching services, while Reuters will provide trading access, trade notification and market data distribution.
The companies say FXMarketSpace will capitalise on the growing demand for broader access to the FX market, the emergence of FX as an asset class, the growth of non-bank financial institutions in global FX markets and the growth of electronic and algorithmic trading.
The two parties have begun development of the network platform and expect the venture to launch in early 2007, following regulatory approval.
Craig Donohue, CME CEO, says global FX markets are already the world's largest market in terms of daily turnover are poised for continued growth and change.
"We believe that FXMarketSpace is perfectly positioned to capitalise on this growth potential by offering bank and non-bank participants, an efficient, anonymous and centrally-cleared alternative to the current spot and forward markets," he adds.