London Futures Trading By CME
It is been reported by Reuters on Wed Mar 2, 2011 that the world’s biggest oil trading bourse, CME Group Inc is looking at launching a futures exchange in London in order to capture more emerging market business.
This news is announced by CME Group Inc’s CEO, Craig Donohue to Reuters Future Face of Finance Summit on 2nd March 2011. According to Craig Donohue, the company is looking at a market that has benefited from its relative proximity to Asia. Hence, London is a perfect market for futures and over-the-counter trade.
London has been better positioned geographically to take advantage of booming demand for commodities in Asia, while stricter regulation in the United States in the wake of the financial crisis has also encouraged some to trade elsewhere.
A move into the London commodities market could significantly raise the stakes for CME and ICE as they compete for market share.
“We have fairly significant ownership stakes in a number of countries like Malaysia and Dubai so we are also going to be looking, and I think London will be included in that, to think about more flexible arrangements for CME group on a going forward basis.” Donohue said.
Though it is a public news that CME had gained regulatory approval in December for a European clearinghouse in London that is set to launch later this year, no one knows what exactly the plans were.
One of the major impacts to NYMEX is, as the London-based ICE Exchange has captured a growing share of combined crude and product futures volume in recent years, it will not be surprised that this could be set to overtake NYMEX as the first oil trading hub in 2011.
Underscoring the challenge facing CME, its main rival for interest-rate futures, NYSE Euronext, also operates a London exchange, and Deutsche Boerse’s planned acquisition of NYSE would create a dominant futures business there.
Donohue said on Wednesday that regulators in the United States risked going too far and they did not know the full economic implications of plans to introduce position limits for commodities like crude oil.
“Global capital really does shift pretty easily,” Donohue said. “We’re pro-regulation … (but) we do run the risk we’ll see business shift away from the United States.”
Resource: Reuters