Eurex's US Futures Exchange Gains Approval, Eying Competition with CBOT

Strategic Insights -

Eurex's newly approved US Futures Exchange is set to launch in Chicago this Sunday, offering US Treasury futures contracts in direct competition with the Chicago Board of Trade (CBOT). This regulatory approval allows Eurex to take advantage of its deep-pocketed parents, Deutsche Borse and the Swiss Exchange, to attract business. The CBOT has responded by cutting its fees for the next six months, but Eurex's potential for transatlantic clearing gives it a significant competitive advantage.

Key Takeaways:

  • The US Commodity Futures Trading Commission (CFTC) has approved Eurex's US Futures Exchange, enabling it to launch in Chicago on Sunday.
  • Eurex will offer US Treasury futures contracts, directly competing with the Chicago Board of Trade (CBOT).
  • The CBOT has cut its fees for the next six months to neutralize price as a competitive weapon.
  • Eurex has a potential competitive advantage due to transatlantic clearing, which would allow customers to clear trades in Europe or the US and reduce margin requirements.
  • The CFTC no longer requires Eurex to delay transatlantic clearing until the third quarter.
  • Eurex's launch may benefit from the support of large brokerages, despite the initial challenges of creating a pool of liquidity and taking share away from the CBOT.
  • Lower fees have already benefited market participants.

Statistics:

  • Eurex's US Futures Exchange will launch in Chicago on Sunday.
  • The CBOT has cut its fees for the next six months.
  • Transatlantic clearing could reduce margin requirements for market participants.
  • The CFTC has given Eurex the green light to establish a transatlantic clearing link.

Sources:

  • Reuters
  • Bloomberg
  • The Financial Times
  • The Chicago Tribune