Eurex to go head-to-head with CBOT

European derivatives exchange Eurex plans to launch a US exchange that will compete directly with the Chicago Board of Trade (CBOT).

Eurex said it is in advanced talks with regulators and market participants to prepare for a January 2004 launch, when an alliance the exchange currently has with the CBOT formally ends. Earlier this week Eurex dismissed rumours that it is accelerating its strategy to expand in the US.

Eurex plans to offer the full range of derivatives on US interest rates, indexes and equities that its customers can currently access through its a/c/e (Alliance/CBOT/Eurex) electronic trading platform, which was launched in August 2000 specifically to market CBOT products.

“With the launch of the new exchange, customers will benefit from a market model that establishes a level playing field for all participants as well as open access, seamless integration of the over-the-counter market and a low-cost pricing structure,” Eurex said in a statement.

"Our customers worldwide will be able to leverage their existing Eurex and a/c/e infrastructures tobenefit from low-cost open access to the full range of US and European products," said Rudolf Ferscha, Eurex chief executive.

Co-operation between the CBOT and Eurex began in October 1999. The a/c/e initiative was designed to give European customers access to CBOT products while providing the Chicago exchange with an electronic trading capability. But in July Eurex acquired full ownership of the electronic trading platform, effectively ending the three-year partnership agreement that saw the European exchange publicly criticise its Chicago partner for failing to invest in the electronic trading system.

The exchanges agreed to shorten the remaining term of a/c/e from October to January 2004 and to eliminate, from the same date, all product and co-operation restrictions previously in place until 2008. This paved the way for Eurex to compete directly with the CBOT.

A Eurex spokesman told RiskNews the exchange will have a competitive advantage in the US through its “superior market model”. “Trading on Eurex is much more cost effective than on other exchanges, including the CBOT,” he said. “The average cost of one trade on Eurex is €0.50. Trade fees are double, triple or more on other exchanges.”

The CBOT was not immediately available for comment.