15 Oct 2003, Navroz Patel, Risk magazine
Last month, Eurex announced that it would use TCC - also known as the Board of Trade Clearing Corporation - to clear trades on Eurex US when the US exchange is launched on February 1 2004. As part of the Eurex-TCC partnership, it was proposed that TCC change its structure in two significant ways: Eurex was to take a 15% stake in TCC, and have one seat on the board of directors. According to Eurex US’s suit, the CBOT and CME collaborated to launch their offer to TCC shareholders, “despite having no legitimate interest in the outcome of the vote, but with the sole purpose of preserving CBOT’s monopoly position”.
“With this action we want to re-establish a level playing field on which we can compete on the merits,” said Michael McErlean, a director of Eurex US. But the CME claimed it appeared Eurex was creating a smokescreen to avoid regulatory scrutiny of Eurex US's application to become a designated contract market. “CME has not offered, directly or indirectly, any financial inducements to shareholders of TCC to vote against a proposed restructuring of TCC,” said Craig Donohue, who will become CME’s chief executive at the beginning of 2004. In a further broadside, Donohoe added that the CME will file a comment letter with the Commodity Futures Trading Commission (CFTC), “pointing out material deficiencies and defects in the Eurex US application”.
CBOT president and chief executive Bernard Dan was equally dismissive: “This lawsuit is an attempt by Eurex to deflect attention from the shortcomings of its own US application. We believe its efforts will fail,” he said. Dan maintained the CBOT’s actions simply sought to ensure a smooth and orderly transfer of responsibility for clearing services from TCC to the CME. Eurex US’s lawsuit, filed in the US District Court for the District of Columbia, accuses the CBOT of offering a “spurious justification” of its actions.
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