German derivatives exchange Eurex is to launch its own US exchange in a move seen as a counter-blast to a Chicago Board of Trade vote yesterday on the future provision of electronic trading support.
Eurex, the world's largest derivatives exchange, says it will look to directly enter the US equity options market by 2004. The exchange says it is in advanced talks with regulators to prepare for launch and that it has yet to decide whether to buy or build its own options exchange.
The development is being viewed as a shot across the bows of the Chicago Board of Trade, which last night voted on its next electronic trading system provider. The Cbot currently uses the a/c/e network of Eurex but has indicated that it may switch to the Liffe Connect platform of Euronext-Liffe.
The final decision is expected to be announced publicly next week, but Eurex's immediate response suggests that Cbot directors have rejected an extension of the existing a/c/e agreement.
Hostilities between the two exchanges erupted with the restructuring of the a/c/e alliance in July 2002, when Eurex and CBOT agreed to shorten the remaining term of the deal from October to January 2004 and to eliminate by the same date all product and co-operation restrictions previously in place until 2008. This liberates Eurex to fully compete in the US market in all products and to establish new partnerships.
More than 70 percent of all US bond futures are traded over the a/c/e network, which Eurex says will form the foundation for its entry into the US. Seventy-two of Eurex's current membership are based in the US
Rudolf Ferscha, Eurex CEO, emphasises the benefits to US participants of remaining with a/c/e: "Our customers worldwide will be able to leverage their existing Eurex and a/c/e infrastructures to benefit from low cost open access to the full range of US and European products."
The Chicago Board of Trade has confirmed plans to switch electronic trading support to the Liffe Connect platform when its current agreement with Eurex expires at the end of the year. The news was announced at a hastily scheduled press conference at 15.30 BST Friday.