CME’s European expansion continues

Approval for the launch of its European exchange has been granted to CME Group by the UK regulator, the Financial Conduct Authority (FCA). This represents another piece in CME’s European infrastructure jigsaw, alongside CME Clearing Europe and CME European Trade Repository. CME Europe will be a Recognised Investment Exchange and will be opening on 27 April 2014. The approval for CME’s European exchange means that it can list its first commodity products on this date. It also plans to launch a full suite of FX futures products on the same date.

The FX futures are "subject to final regulatory approval of certain operational clearing conditions," according to a release distributed by CME to announce the regulatory approval of its exchange, something that it has been waiting for since 2012. These conditions leading to final regulatory approval for the launch of FX futures, with over 30 foreign exchange contracts, are dependent upon CME being able to show that it can meet the standards laid out by the Bank of England in a No Objection Certificate that the BoE has granted to CME.

The exchange first has to launch to show that it can meet these standards. Now that regulatory approval has been granted, CME can commence testing with its clearing members to prove that it can meet these standards. All being well, it will be able to launch the intended full suite of FX futures alongside the commodities offering on 27 April.

CME had planned to launch its European exchange in September 2013. This was met with repeated delays as the BoE examined CME Europe’s processes for clearing the trades through its clearing house, CME Clearing Europe. It was suggested at the time that the BoE, the regulator of clearing houses in the UK, feared that CME could pose systemic risk to the currency trading markets.

"Our European customers are increasingly looking for ways to manage risk and access liquidity in a local jurisdiction,” said Terry Duffy, CME Group executive chairman and president. “CME Europe now allows us to better serve our customers in the region as we expand our business with relevant products. In addition, the combined move to central clearing and London serving as the centre of global foreign exchange trading will mean our new exchange is well positioned to serve all of Europe."

It also means that CME Group is well placed to challenge Eurex and IntercontinentalExchange (ICE) for European clients. ICE, of course, bolstered its European operations with a merger with NYSE Euronext at the end of 2013.

CME has been working hard to expand its brand recognition in Europe, with the launch of CME Clearing Europe, CME European Trade Repository and now CME Europe. 

Tags: CMEFXBank of EnglandFCA