Chicago Board of Trade (CBOT) and Eurex have called time on the a/c/e electronic trading joint venture, hammering out a new deal which sees the German exchange take over the platform as the CBOT scales back its involvement and becomes a licensee.
The agreement replaces all former contracts and runs until January 2004, terminating earlier than originally planned. Crucially, it permits each partner to independently launch new products denominated in US-dollars and euros, respectively, outside of a small number of their core product offerings.
The a/c/e platform uses technology developed by Eurex to distribute CBOT products to market users. Since its launch in August 2000, use of the system has grown steadily, with CBOT electronic trading volume currently averaging over 408,000 contracts per day.
Under the new deal, Eurex is providing CBOT with a non-exclusive, royalty-bearing licence split into a fixed and a variable component for the use of the Eurex software. The license covers the current version a/c/e 1.0 as well as a new software version (a/c/e 1.1.) to be implemented within the first quarter of 2003.
The agreement relieves CBOT of its obligations to contribute to development costs; consequently, CBOT has waived its co-ownership rights under the old contracts. Deutsche Börse Systems will continue to operate the CBOT's electronic market for the duration of the new agreement.
Rudolf Ferscha, Eurex CEO, says: "Eurex has multiple formats for cooperation and this new agreement allows us to act as a service provider with charges being based on the success of the a/c/e platform."
David Vitale, CBOT president and CEO, comments: "This agreement gives us the flexibility we desire for new product development as well as the opportunity to continue to provide an efficient and reliable electronic platform."
CBOT says it will use its newfound freedom to explore opportunities for the development of new single stock futures products. The termination of the a/c/e alliance however leaves the Chicago exchange vulnerable to new technological developments at a time when futures trading is increasingly moving away from physical open outcry trading pits.