Since going public in 2002 and setting as a goal participation in the expected industry consolidation, the CME has been a rumored acquirer of every exchange thought to be on the market, and some that weren’t.
So far the CME has not made the big splash acquisition, like the New York Stock Exchange/Euronext deal, but recent moves indicate a more strategic approach — like an emerging presence in OTC markets.
In July the CME acquired Swapstream, a London based multilateral electronic trading platform for interest rate swaps. This comes on the heals of its 50/50 partnership with Reuters on forex trading platform FXMarketSpace, set to launch in 2007.
Swapstream supports electronic trading of Euro and Swiss franc denominated medium- and long-term interest rate swaps, allowing the CME to compete in the long end of
the yield curve.
Robin Ross, managing director of interest rate products at the CME, says Swapstream brings transparency to the OTC marketplace. “Users see multiple bids and offers with the ability to filter [out who sees their bids and offers],” Ross says.
She describes the acquisition as strategic. “This allows us to get involved in the OTC market [and] enables us to leverage our clearing capability to bring greater processing efficiency to the OTC market.”
The CME estimates the notional value of the OTC interest rate swaps market to be $164 trillion.
The first order of business according to Ross is to broaden the product base. The CME plans to roll out dollar denominated swaps on Swapstream by the first quarter of 2007 and eventually follow with swaps on additional currencies.
In a release, CME Chairman Terry Duffy said the CME and Swapstream will bring greater operational and processing efficiencies to the global interest rate swap market.”
By Daniel P. Collins
