Eurex US will be a U.S. regulated exchange and will offer a full range of products including derivatives on U.S. and European interest rates and indices.
At the same time Eurex US will offer trading at cost levels far below those currently paid in the U.S. market: the vast majority of trades will be priced at 20 cents per contract or less depending on participation in incentive schemes. No individual trade, regardless of volume, will cost more than 30 cents per contract.
Eurex US will commit to maintain key prices for a period of five years. Eurex expects that customers can save more than 100 million USD in trading fees annually.
Eurex CEO Rudolf Ferscha said: "Eurex US will create new trading and clearing opportunities for our customers worldwide and accelerate growth in the U.S. financial industry as a whole. Eurex US will establish a level playing field in the U.S. futures industry for the first time. All its customers will have open and equal access to the world's most reliable and scalable electronic trading system at the lowest cost."
With this step Eurex US will offer customers worldwide 20-hour electronic trading and clearing in U.S. Dollar- and Euro-denominated futures and options on futures. It will give U.S. customers direct access to and choice of clearing of the most liquid European futures for the first time. Eurex US will be based in and fully operated out of Chicago. It will use The Clearing Corporation as its U.S. clearing partner.
Eurex US will offer 20 hour trading from 8 p.m. until 4 p.m. the following day. Its products will include futures and options on 2-, 5- and 10-year Treasury notes and on 30-year Treasury bonds as well as the world's most liquid derivatives, the 2-, 5- and 10-year contracts on Euro interest rates.
It will also include the most liquid European index derivatives, the futures on the European indices DAX(r) and Dow Jones Euro STOXX 50SM. All European products will continue to be also traded on Eurex's European platform and will be fully fungible with Eurex US' products.
There will be no membership fees and customers will not need to buy seats in order to participate in Eurex US. This will give customers the opportunity to trade on Eurex US without holding a stake in the exchange, further removing barriers to entry.
Eurex US filed formally for an exchange license with the Commodity Futures Trading Commission (CFTC) this morning. Ferscha stated:
"We have had a very constructive dialogue with the CFTC and we look forward to working with the commission both now and in the future."
Eurex seeks to intensify its partnership with U.S. customers. As announced in early September, Eurex will enter into an equity partnership in The Clearing Corporation, with Eurex taking a 15 percent equity stake with a wide range of US market participants holding the remaining 85 percent.
Under the global clearing partnership agreement signed on 3 September (see previous Hedgeweek article) The Clearing Corporation will clear all trades for Eurex US. Customers of The Clearing Corporation will also have direct access to Eurex's European products.
At the same time, Eurex customers worldwide will be able to clear Eurex US products via both Eurex Clearing as well as The Clearing Corporation.
This global clearing partnership will increase the efficiency and flexibility of U.S. market participants through full fungibility, enhanced cross-margining and reduced collateral through the use of collateral pools for a wider range of products. As a result customers will save up to 95 percent of their current margin requirements, substantially increasing the efficiency of capital employed.
Ferscha stated that Eurex is extending an invitation to U.S. market participants to become equity partners in Eurex US and that a significant stake in the exchange's equity is reserved for this purpose. There will be substantial industry participation in the exchange's governance.
The Eurex US trading system will be based on the same state-of-the-art infrastructure and network as the successful a/c/e platform, on which over 80 percent of all trading in U.S. fixed income futures currently takes place. Current a/c/e users will be able to leverage their existing infrastructure with minimal implementation effort and expense.
The new Eurex US trading platform will feature additional functionalities, which will give customers easy access to new trading strategies and facilitate a seamless integration of the OTC markets, creating new opportunities and further growth.
Michael McErlean, a Director of Eurex US, said: "Eurex US represents a tremendous opportunity for customers worldwide. The high level of interest in our offering shows that customers are eager to participate in Eurex's global liquidity network and get access to the most liquid derivatives products worldwide. Access to a wider product range will increase their opportunities and our customers can lower their costs significantly. This will stimulate growth and strengthen Chicago's role as a financial centre."
Background Note: Eurex is the world's leading futures and options market for derivative instruments and the highest volume derivatives clearing organization in the world. Total clearing volume on Eurex exceeded 801 million contracts in 2002. It provides access to a broad range of international benchmark products: Eurex operates the world's most liquid fixed income markets, with 450 million contracts traded in the 2-, 5- and 10-year Euro interest rates in 2002. At the same time, Eurex is the leading exchange in European index products with a market share of over 70 percent. Furthermore, in the equity options business Eurex traded contracts with an underlying value of Euros 583 billion in 2002, making it the largest equity options market worldwide.
Copyright Hedgeweek 2003