NYSE faces "tough" fight with CME, CFO says

Reuters

CHICAGO (Reuters) - NYSE Euronext's planned assault this month on CME Group Inc's flagship U.S. rate futures franchise will be tough going because traders value liquidity, CME Chief Financial Officer Jamie Parisi said on Wednesday.

NYSE's key selling point is a cross-margining program for Treasury futures and Treasury securities that it says will cut traders' costs significantly. NYSE plans to start offering rate futures trading on its U.S. futures exchange on March 21.

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"It's really predicated on the idea that margining efficiencies trump liquidity," Parisi said of NYSE's offering, speaking at a Citi Financial Services Conference. "Liquidity as I said earlier is very very important to our customers ... as I look at that, that's a tough thing to overcome."

CME has dominated U.S. rate futures since two of its markets, the Chicago Board of Trade and the Chicago Mercantile Exchange, invented them decades ago. It is also offering new cross-margining discounts to its customers which will cut costs without hurting the safety of its clearinghouse, Parisi said.

Separately, CME will launch its European clearinghouse next quarter and will guarantee trades in about 150 over-the-counter energy derivatives, Parisi said.

The clearinghouse, which received approval in December from UK financial authorities, is key to CME's bid to expand internationally and to provide new clearing services to the vast OTC derivatives market.

After the 2007-2009 financial crisis, regulators worldwide are pushing to move more of the opaque off-exchange derivatives market into clearinghouses and onto transparent trading venues, and CME is seeking to take advantage of the trend.

So far CME has cleared about $1.3 billion in a market whose underlying value is pegged at more than $400 trillion.

(Reporting by Ann Saphir, editing by Matthew Lewis)