CME Group Adjusts Fees Ahead Of Rival Exchange's Launch
June 16 2009 - 12:29PM
Dow Jones News
CME Group Inc. (CME) announced wide-ranging changes to its
trading fee schedule Tuesday as the dominant U.S. futures exchange
faces the launch of a competing platform, expected in the coming
weeks.
CME will expand volume-based fee incentives for its interest
rate, equity index and foreign exchange futures, lowering prices as
ELX Futures LP, a consortium-backed venture, prepares to challenge
CME's lock on the Treasury futures market.
Under a new fee regime effective Aug. 1, Treasury futures
traders who are CME members will be charged a flat rate of 5 cents
per trade side, while non-members will pay as little as 8 cents per
side, as long as they trade more than 45,000 contracts per day on
average.
That's cheaper than ELX, which announced last week that it plans
to charge 9 cents for high-volume traders.
However, CME's fees don't include clearing, which costs 6 cents
per trade side for Treasury futures and wasn't affected by
Tuesday's announcement; ELX's fees include clearing through the
Options Clearing Corp.
Starting Aug. 1, traders in CME's interest rate futures will
also be able to aggregate volume across multiple product lines to
qualify for volume discounts.
CME instituted a separate volume-based incentive framework for
E-mini equity index products, excluding contracts tracking the Dow
Jones Industrial Average. The exchange also standardized fees in
agricultural commodity products.
The fee cuts at CME arrive as ELX eyes a launch date around the
July 4 holiday weekend.
Chicago-based CME, which handles more than 90% of the U.S.
futures business, has lowered fees in the past when confronted by
rivals targeting its franchises.
However, Donald Fandetti, an exchange sector analyst with Citi
Investment Research, wrote in a research note that low fees alone
aren't enough to pull business away from CME.
"In terms of ELX, their pricing on interest rate futures may be
lower than CME, but CME's tighter execution spread will more than
offset the lower price," he wrote.
A CME spokesman said the exchange continually evaluates its fee
structure with an eye toward building liquidity; ELX officials
declined comment.
ELX Futures is supported by a group of banks, proprietary
trading firms and technology companies, including Citigroup Inc.
(C), Deutsche Bank (DB), Merrill Lynch & Co. and its acquirer,
Bank of America Corp. (BAC), Barclays PLC (BCS) unit Barclays
Capital, Credit Suisse Group (CS), BGC Partners Inc. (BGCP), Getco,
JPMorgan Chase & Co. (JPM), Peak6, and Royal Bank of Scotland
PLC (RBS).
Chicago hedge fund firm Citadel Investment Group was also a
founding ELX member, but gave up its seat on the board after
announcing plans to join CME in a credit default swap clearing and
trading platform. Citadel still holds an equity stake in ELX.
-By Jacob Bunge, Dow Jones Newswires; (312) 750 4117;
jacob.bunge@dowjones.com