UPDATE: CME Considering Asian Clearinghouse

CME Group Inc. (CME) is considering the development of an Asian trade-clearing unit, building on a nascent clearinghouse venture just launched in Europe, according to the company's chief executive.

No conclusions have yet been made on developing such a venture, but CME CEO Craig Donohue said the fast-growing region could benefit from a robust facility that could make trading more efficient for big firms.

"We're thinking about that," Donohue said, speaking Thursday to investors at an event hosted by Sanford Bernstein & Co.

"Asia's a very fragmented marketplace for post-trade clearing services and most of the providers lack real scope and scale advantages, like some of the major clearinghouses in North America and Europe," he said.

CME has spent decades building ties to exchanges and regulators in Asia, positioning in advance of regulatory moves to open the way for more trade to flow into and out of a region that last year for the first time overtook North America in terms of derivatives trading activity.

Contract volume on Asia Pacific markets jumped nearly 43% in 2010 over prior-year levels, more than doubling North America's 13% increase and a 15% rise for Europe, according to data from the Futures Industry Association.

CME last month rolled out its long-planned CME Clearing Europe venture, based in London, offering an initial slate of trade-clearing services for energy products that are bought and sold off-exchange. Clearing is the process in which a central counterparty stands between each trade to mitigate the fallout if a major trader defaults.

The idea behind CME Clearing Europe is to give banks and swap buyers the option to clear their trades under the U.K. bankruptcy regime, as opposed to CME's existing clearinghouse situated in the U.S. Donohue said the London-based venture in time intends to add new services to clear interest-rate swaps and credit derivatives.

CME is focusing on organic growth efforts amid a spate of consolidation sweeping the exchange business, and Donohue on Thursday said that the futures market giant sees little value in building a portfolio of markets that span asset classes, a strategy currently being pursued by two of its biggest rivals.

"We were never a big believer in a 'supermarket' of exchanges," Donohue said.

Deutsche Boerse AG (DBOEF, DB1.XE) and NYSE Euronext (NYX) are pursing an agreed-upon merger deal that will combine the two companies' futures, equities and options exchanges into what would be the biggest exchange group in the world.

Executives of both companies have touted the diverse range of products and services traded, making trade more efficient for big clients and positioning the merged entity as an attractive partner for fast-growing Asian markets.

Donohue on Thursday said the CME had determined that the increasing sophistication of customers trading multiple asset classes made it less attractive for CME to develop offerings outside its core futures business.

"We felt that technology had obviated the value of putting cash equities, futures and options markets together on the same platform," he said.

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

CME (NASDAQ:CME)
Historical Stock Chart
From May 2024 to Jun 2024