CME Group’s proposed European exchange launch will still be “specifically focused” on FX futures products, according to senior managing director Derek Sammann.
His comments follow reports this week that CME Europe may be preparing to launch with energy instruments, due to the repeated regulatory delays caused by the planned launch with exchange-traded FX instruments.
“The FX business is difficult from the regulatory perspective and energy may be a way of getting into that market quicker,” a leading industry commentator says.
But CME continues to seek authorisation for the London-based venue on the basis it will offer FX contracts for trading, the senior managing director for foreign exchange, metals and options tells Profit & Loss.
“We certainly have multi-asset class ambitions, but we have started with FX,” says Sammann. “High demand is coming from FX – that is why we are driving so hard to push FX over the line. That’s what we have committed to doing for our customers and that is what we are pushing for.”
From the start of the regulatory approval process, CME Europe has said it will initially launch with 30 FX futures products with further asset classes to follow based on client demand.
While it appears to have satisfied the requirements of the UK’s Financial Conduct Authority, the delay has occurred in obtaining approval from the regulator responsible for clearing and settlement, the Bank of England.
According to Sammann, the move is all about new client acquisition. “We are not building the exchange in an effort to move business away from that jurisdiction,” he adds. “But we know there is another base of customers that we can’t currently attract, and particularly in this regulatory environment it is critically important to service that client where they do business.”
He explains that the challenging start to the year for FX is due in part to the timetable for regulatory implementation, what impact these new mandates will have and the effect they will have on the cost of doing business.
“That is creating uncertainty in the client environment,” he adds. “And what we have found in our US franchise, which is global in nature but warehoused in the US, is that our clients are saying, 'I don’t know where the regulation is going but I do know an exchange wrapper solves most of my problems'.”
CME is also very confident that the market structure shifts are creating opportunities, Sammann explains, as business models change: shifting from principal to agency; different risk transfer agents, etc.
“We are about providing certainty to our customer base,” he says. “We are very bullish on the FX market, very bullish on Europe and very bullish on the UK.”