CME applies to create European derivatives exchange in London

CME Group has applied to set up a derivatives exchange in London in a move which would strengthen the City’s position as a global financial centre.

The futures exchange operator announced it has applied to the Financial Services Authority to create the London-based bourse. CME intends to begin trading foreign exchange futures products from mid-2013, should it meet regulatory approval.

Creating an exchange in London would put CME in direct competition with Liffe and Eurex, which are currently the largest derivatives trading bourses in Europe.

London is also home to the derivatives businesses of Nasdaq OMX, IntercontinentalExchange (ICE) and NYSE Euronext’s Liffe derivatives branch. Deutsche Börse’s Eurex is based in the German city of Frankfurt.

CME executive chairman and president Terry Duffy said: “We continue to see an increase in business coming from our diverse set of customers in Europe, with more than 20% of our volume now originating from the region

Duffy added: “Having an exchange in London that can leverage the central counterparty model of CME Clearing Europe will allow us to align ourselves even more closely with our regional customers in both listed futures and over-the-counter markets, and provide additional opportunities to our expanding non-US customer base.”

CME is a major player in US derivatives trading and it makes 80% of its revenues in North America. However, it has increasingly been restricted by regulators and has looked to grow its London base in the last year or so.

Employee numbers in the capital have doubled in three years to more than 150 after it opened a clearing house.

Should the Financial Services Authority approve CME’s application for a Recognised Investment Exchange licence, it would only be the sixth such licence granted in the UK.

The business would be called CME Europe and would be managed by Robert Ray, who is currently the company’s managing director of products and services.

Phupinder Gill, CME’s chief executive, said: “Our application to establish an exchange in Europe fits within our strategy to grow organically and is an important next step to meet the growing regional demand from our customers.”

Gil continued: “Launching with a suite of FX products allows us to leverage our 40 years of experience in FX futures for customers in the region who access the futures market during the London business day, but we also plan to look at expanding into additional asset classes.”