Magazine article Modern Trader

Eurex US Moving into Forex

Magazine article Modern Trader

Eurex US Moving into Forex

Article excerpt

After failing to wrestle market share away from the Chicago Board of Trade's (CBOT) Treasury complex, Eurex is fixing its aim a couple of blocks west by listing the original financial futures--currencies. Eurex US all but gave up on the Treasury complex as it announced plans to launch foreign exchange futures on Sept. 23. Satish Nandapurkar, chief executive of Eurex US, explained at a press briefing on June 16 in Chicago that the window of opportunity for Treasury products had passed.

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Eurex's products differ from those of the Chicago Mercantile Exchange (CME) primarily in size; the notional value of the Eurex contract is 250,000 currency units--double that of most of the CME's--and its method of quotation: referencing dollar crosses in dollars per unit rather than in units per dollar, so interbank and spot forex traders will be familiar with the quotes. The CME also offers its currency futures quoted in this format through its listing on the Reuters Dealing 3000 platform. The contract size and method of listing is an indication that Eurex US is courting the same institutional dealers the CME targeted with the Reuters deal.

Rudolf Ferscha, CEO of Eurex, said there is a strong demand for Eurex to offer forex trading. Ferscha said the product line was a result of research conducted on what customers, mostly hedge funds and commodity traders, were looking for in such products and says the launch into forex is a timely move due to the continued growth in the forex market.

He also says the fragmentation across multiple venues leaves development space for new distribution, and that the customer environment is changing rapidly and the forex market is moving towards an exchange model. Exchange-traded forex futures make up 2% of the total forex market according to Eurex. Rick Sears, managing director, CME foreign exchange, says that number is misleading. …

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