CME Takes Aim At NYSE Euronext's UK Interest Rate Business

CME Group Inc. (CME) on Thursday laid out plans to launch a new slate of European-flavored interest-rate contracts, escalating a battle with NYSE Euronext (NYX) over one of the world's most heavily traded derivatives markets.

The Chicago-based exchange company aims to launch futures and options on the Euribor, a key rate reflecting the cost of borrowing euros on the inter-bank market, in the second half of 2011.

NYSE Euronext's U.K. futures division Liffe is the longtime home of trading in Euribor contracts, and CME's push into the business follows NYSE Euronext's March launch of popular U.S. interest-rate futures traded at CME.

"By putting Euribor futures and options on CME Globex with our deeply liquid interest rate product suite, our customers will realize more trading opportunities, greater capital savings and operational efficiencies," said Derek Sammann, CME's managing director of interest rate and foreign exchange products, in a statement.

A spokesman for NYSE Euronext had no immediate comment.

CME is home to Eurodollar futures, contracts that allow banks, hedge funds and other institutions to hedge against shifts in the three-month U.S. dollar London interbank offered rate, or Libor. The Libor, indicating the cost of borrowing U.S. dollars on the London interbank market, is a global benchmark for floating rate lending.

The Eurodollar ranks as the world's most heavily traded fixed-income future with nearly 511 million traded in 2010, according to data compiled by the Futures Industry Association. NYSE's Euribor futures market is about half the size, with 249 million contracts traded last year.

By adding Euribor contracts, CME is banking on clients' enthusiasm for its U.S. interest-rate futures translating into an appetite for the short-term, euro-based contracts. Customers at CME will be able to post collateral against trades in both product lines at the company's U.S. clearinghouse.

CME's introduction of the contracts comes as the NYSE Euronext's Liffe division is poised to become a more dangerous opponent. NYSE's agreed deal to merge with Deutsche Boerse AG (DBOEF, DB1.XE) would combine the short-term U.K. interest-rate contracts with German-based futures and options that reflect the long end of the interest-rate curve, creating a European version of the U.S. rates complex run by CME.

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

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