European derivatives exchange Eurex says it will establish a transatlantic trading and clearing link that will enable its customers to access options products at the New York-based International Securities Exchange (ISE), which it acquired last year.
Eurex says it has already taken the first step towards ensuring a definitive agreement by signing a term sheet with ISE and the Options Clearing Corporation (OCC), the central counterparty for all US listed securities options contracts.
The link will enable Eurex members to use their existing connections to access the full suite of options products available at ISE and execute orders in the US exchange's order book.
"Non-US market participants will now find it easier to trade and clear US products that will be offered through this link," adds Wayne Luthringshausen, chairman and CEO, OCC.
At the moment only 16 of Eurex's 400 direct exchange members are trading on ISE.
Luthringshausen told FT reporters that many smaller European firms have been deterred from investing in US options by the existing process where traders outside America can only buy US options through a US-based broker-dealer.
Andreas Preuss, CEO, Eurex, told the FT that by establishing the clearing link, Eurex is was responding to customers' demands for a wider range of financial products.
"By establishing the first modern transatlantic trading and clearing link between the US and European options markets, our customers will benefit from full and seamless access to the world's largest equity options market," says Preuss in a statement.
The new link will also provide the cross-selling, revenue generating possibilities the exchange targeted when it bought ISE last year, says Preuss.
Deutsche Börse's majority-owned Eurex exchange paid around $2.8 billion for ISE last year and said the American exchange would continue to operate as a separate unit under US regulations.
The transatlantic link is expected to be implemented in the second half of 2009, subject to regulatory approval.