UPDATE: CME Considering Asian Clearinghouse - CEO Donohue
June 02 2011 - 5:19PM
Dow Jones News
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
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