Tim Boyle/Bloomberg News
Traders at the CME Group’s Chicago Board of Trade.
The CME Group is planning to start a European derivatives exchange, in a significant expansion of the American market operator’s global footprint, a person briefed on the matter said on Sunday.
The move is the latest effort by an American exchange to plumb for new ventures. As their core business has come under pressure and margins shrink, industry leaders have been expanding into lucrative areas like overseas markets and derivatives trading. CME, whose $18 billion market capitalization makes it one of the most valuable market operators in the world, now makes most of its profit from derivatives.
CME has been particularly aggressive, using a combination of deal-making and creating new platforms. The company was created by the merger of the Chicago Mercantile Exchange and the Chicago Board of Trade in 2007. It bought the New York Mercantile Exchange a year later.
It made a big push overseas starting three years ago. Last year, the company established a European clearing house. In February, it increased its stake in the Dubai Mercantile Exchange to 50 percent.
The company’s newest exchange will compete directly with two existing heavyweights in the European derivatives exchange sector, Deutsche Börse’s Eurex and NYSE Euronext’s Liffe. Those exchanges would have been combined under a proposed merger of NYSE Euronext and Deutsche Börse, which was blocked by European antitrust regulators earlier this year.
While CME had been considering setting up the next exchange for some time, the project had been delayed by a number of matters, including scrutiny because of the failed NYSE-Deutsche Börse merger, the person said. It was also postponed after CME bid for the London Metals Exchange, which would have given it an existing market to build upon. But the American market operator withdrew from the sales process.
An application to operate the new exchange, which will begin with the trading of currency futures, is expected to be filed with Britain’s Financial Services Authority as soon as Monday, this person said. The exchange will be based in London. CME’s plans were reported earlier by Bloomberg News.