ICE Expands FX Futures Offerings In Push To Compete With CME

IntercontinentalExchange is revamping its foreign-exchange futures offerings as it looks to cut into competitor CME Group's position in the fast-growing market.

ICE said Wednesday it is adding new contract sizes for some FX futures pairs, primarily contracts in euro-related pairs, that match the size of contracts already offered by CME.

The move is part of a strategy to take advantage of the growing business ICE has seen in its U.S. Dollar Index futures trading, and takes aim at much-larger CME's fastest-growing business. Wednesday's move matches ICE's 2006 initiative to launch a copycat version of CME's benchmark crude oil futures, where ICE has gained a substantial foothold.

ICE's popular dollar index has seen a sharp rise in trading over the past three years. Average daily volume has jumped to 41,241 contracts in May from 6,210 contracts during the same month in 2008.

Those new customers have told ICE they would be interested in trading FX futures at ICE if they offer similar-sized contracts to the CME ones because many trading and algorithmic models are set for those CME contract sizes, said Ray McKenzie, vice president of ICE Futures U.S. That led ICE to offer the new contracts. Eventually the new ICE contracts will completely replace the current ones that are different sizes, he said.

ICE's push to expand its footprint in the $4 trillion-a-day foreign exchange market also comes amid uncertainty regarding regulation. U.S. and European lawmakers are trying to push more trading toward regulated exchanges like ICE and CME as part of a broader overhaul of over-the-counter trading.

Attempts by exchanges to wrest trading activity from established rivals typically fail, with numerous attempts by startups to challenge CME's interest-rate futures complex meeting limited success over the past decade.

However, ICE, which runs the dominant market in Brent crude oil futures from its London arm, five years ago directly challenged the CME's New York Mercantile Exchange unit for trading in West Texas Intermediate crude oil futures and succeeded in winning some business.

In the first quarter of 2006, ICE claimed about 18% of trading in the market, according to figures compiled by Sandler O'Neill. So far this year, ICE's WTI market share has held around 24%.

-By Stephen L. Bernard, Dow Jones Newswires; 212-416-4528; stephen.bernard@dowjones.com

--Jacob Bunge in Chicago contributed to this report.

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