CME Group’s announcement to apply to the FSA to create a London based derivatives exchange brought a welcome fillip to the City of London in its role as Europe’s leading financial services marketplace.
CME Group has had a presence in London for more than 30 years, so our announcement should not have been a surprise. It has been clear for some time that we have been building a stronger presence in London, having already established CME Clearing Europe in 2011 and also placed the head of our metals business here. London’s strength is its deep reservoir of professional talent, its robust infrastructure and the benefit of a time zone which is centrifugal to the US, Asia and the Middle East.
There is, however, a much more straightforward rationale behind our announcement: more than 20 percent of our trading volume is now emanating from the European region and, clearly, we see further opportunity to develop our business in both listed futures and over-the-counter markets with London as our regional base of operations. Moreover, in following the proven commercial adage of staying close to your customers, it means that the exchange can aspire to align itself more closely and also plan to look at expanding our business. Put simply, CME Group’s move underlines the importance of creating a locally regulated entity offering regional products in a compatible time frame to regional customers – a key part of our international expansion strategy.
Because London remains the primary financial center for FX trading, CME Group plans to start – hopefully by mid- 2013 – launching a suite of global FX products (some 30 per cent of total FX volume already emanates from Europe and Asia). At the same time, we will leverage our 40 years of experience in the FX business and the central counterparty model we have established with CME Clearing Europe.
With access to a local exchange and FX benchmarks here in London, we think European customers are going to be the real winners.