2nd UPDATE:CME's Green Exchange Sees Independent Launch In 1Q

CME Group Inc. (CME) said Thursday it anticipated launching its standalone emissions-trading exchange in the first quarter of 2010, amid continuing efforts to kick-start the U.S. carbon market.

Green Exchange Holdings LLC, a joint venture between CME and a group of banks and brokers, would take over a number of carbon-related products handled by the Chicago group's New York Mercantile Exchange unit, according to a company notice.

In an interview, Green Exchange Chief Executive Thomas Lewis stressed that any launch depended upon approval from U.S. regulators, and that the exchange currently is testing systems with customers.

The Green Exchange plan was unveiled in late 2007, aiming to tap what some industry observers say could become one of the largest asset classes in derivatives, driven by efforts to combat global warming.

While emissions trading is relatively vibrant in Europe, the U.S. market remains small and voluntary as Congress continues to debate a cap-and-trade plan to price and ultimately reduce the release of greenhouse gases.

The Green Exchange's backers are also seeking regulatory approval from U.K. authorities.

The Green Exchange's chief U.S. rival is the Chicago Climate Exchange, owned by Climate Exchange PLC (CLE.LN), which also runs the dominant European emissions-trading platform.

Lewis, a former Ameritrade chief executive, said Thursday that trading volume in the platform's products has been on the rise since he joined the venture in September, and that he expected it to strengthen further this year.

The Green Exchange's current roster of products routed through Nymex include futures and options on European Union Allowances, carbon allowances tied to the Regional Greenhouse Gas Initiative, and other greenhouse gas markets.

Much of Lewis' time has been devoted to building an executive team and securing additional equity investment in the venture, though CME is expected to remain the largest holder.

Lewis said that he was encouraged by the progress made at last month's climate change summit in Copenhagen, which saw major emitters like China and India make plans to help reduce global carbon emissions.

"I believe that commitment is sincere, and it sends a very positive signal to the House and Senate as they're formulating bills," said Lewis.

He said he was "guardedly optimistic" that some form of U.S. cap-and-trade legislation would pass this year, a prospect that would provide a boost to the nascent U.S. carbon-trading industry.

-By Jacob Bunge, Dow Jones Newswires; 312-750 4117; jacob.bunge@dowjones.com

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