CME Group seeks UK regulator approval to open derivatives exchange in London

LONDON | Ultimately, the US platform’s move props up the British capital’s Square Mile as a global European financial hub: CME Group, a leading derivatives marketplace, announced Monday it is in the process of applying to the United Kingdom’s Financial Services Authority to create a London-based derivatives exchange. CME’s executive chairman Terry Duffy explained that already 20 percent of the company’s business originates from clients in the European Union region. Setting an exchange in London would offer a better service in both listed futures and over-the-counter markets, he said.

Pending regulatory approval, CME Europe would initially begin trading foreign exchange futures products in mid-2013. The decision will unnerve clearing houses Eurex and NYSE Euronext Liffe, which will become its direct competitors. And for a good reason.

“Our application to establish an exchange in Europe fits within our strategy to grow organically and is an important next step to meet the growing regional demand from our customers,” said CME Group chief executive officer Phupinder Gill. “Launching with a suite of FX products allows us to leverage our 40 years of experience in FX futures for customers in the region who access the futures market during the London business day, but we also plan to look at expanding into additional asset classes.”

CME Globex will be used as the electronic trading platform and CME Clearing Europe Ltd, which launched in May 2011, will provide central counterparty clearing services.

CME Group also operates CME Clearing, one of the main central counterparty clearing providers, which offers clearing and settlement services across asset classes for exchange-traded contracts and over-the-counter derivatives transactions. These products and services aim at facilitating that businesses mitigate counter-party credit risk.

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