CME, Reuters Join Forces for FX

LONDON—The Chicago Mercantile Exchange (CME) and Reuters are joining forces to create a joint venture targeting the foreign exchange (FX) market, officials from both companies tell DWT.

The venture, FXMarketSpace, will offer a centrally cleared, global FX marketplace, which is expected to become a new vehicle for trading FX, complementing existing trading platforms, CME and Reuters officials say.

CME and Reuters are looking to bring together their experience in data dissemination, distribution, trade matching and central counterparty clearing services. "Our solution provides central counterparty guarantee where the clearing risk becomes the responsibility of the clearing house," says Craig Donohue, CEO at the CME. In the case of FXMarketSpace, the CME will provide the clearing services. "The joint venture company will have service level agreements (SLAs) with Reuters and the CME," Donohue says.

The new marketplace is expected to be accessible through a screen-based trading platform currently under development, according to Reuters. However, the platform will run alongside existing electronic transaction systems such as Reuters Dealing 3000 for interbank trading, Reuters Trading for Foreign Exchange for dealer-to-buy-side connectivity and CME's FX futures and options markets on the CME Globex platform.

"FX traders will benefit from the choice of trading methods—whether by desktop terminal or direct, high speed API connection for algorithmic trading," according to a Reuters statement. Participants can "select their point of access."

"We have had a number of projects with the CME," says Devin Wenig, executive director and president of the business division at Reuters. "And we have been working on this particular one in the past year." The FX market has seen significant changes with the rise of financial institutions and the increasing importance of algorithmic trading "and high-speed, high-strength trading," Wenig says. "The joint venture is directly targeted at these changes."

The CME initially turned to Reuters for the "technology behind Globex," says Leo Melamed, chairman emeritus of the CME.

"We are working with the entire trading community, focusing not only on the big bank players, but also on other non-banks and financial institutions," says Terry Duffy, chairman of the CME.

Users of FXMarketSpace will have access to a Reuters' desktop community in FX, as well as the CME clearing firms and selected independent software vendors. The new platform will allow for anonymous trading with transparent prices on the CME Globex platform.

Beta testing for the FXMarketSpace is slated for November of this year, with an official launch in the first quarter of 2007. The joint venture will be headed by Mark Robson, who will assume the role of CEO. Reuters and the CME will contribute up to $45 million to fund the venture through to profitability. FXMarketSpace is expected to achieve profitability during 2008.