(Adds background, detail, executive and consultant quotes)
By Huw Jones
LONDON, April 12 CME Group, one of the
world's biggest exchanges, is closing two operations in London
by year end after they ran up losses of more than $100 million,
saying on Wednesday customers preferred using its U.S.
The Chicago Mercantile Exchange Group, whose products
include futures contracts on commodities such as wheat and
cocoa, said that after closing its UK-based derivatives exchange
and clearing house, it would continue to have a significant
operation to serve European customers.
"While Europe continues to be a critically important and
expanding market for CME Group ... our customers have shown that
they prefer to access our global products, deep liquidity and
greater capital efficiencies through our U.S. infrastructure,"
William Knottenbelt, CME Group senior managing director,
international, said in a statement.
Analysts said the CME had failed to win market share in
Europe, where arch U.S. rival ICE, as well as Deutsche
Boerse and the London Stock Exchange's LCH,
"CME Europe had a challenging time establishing itself and
was not making the headway some had hoped," said Patrick Young,
an exchange industry consultant. "Thus in the short term CME
Group chairman Terry Duffy consolidates his position as CEO by
being seen as a cost cutter."
CME employs 400 people in London and Belfast. A spokeswoman
for the company said only a "very small single-digit percentage"
of those would be affected.
Since CME Europe launched, Duffy has explained its slow
start by saying it takes time to get such start-ups off the
ground. He took over as CEO after Phupinder Gill retired last
CME's London clearing house was launched in 2011 and the
derivatives trading platform followed in 2014. Cumulative losses
from the two operations totaled $112 million by the end of last
year, mostly from the clearing unit.
Customers from Europe traded an average of 2.6 million
contracts a day last year, the bulk on CME's U.S.-based
CME's EU wheat futures, launched last year in a challenge to
Euronext’s wheat market, would not be affected by the closure of
CME Europe as they are traded via the group's Chicago Board of
Trade exchange in the United States, a CME spokeswoman said.
CME had already decided earlier this year to suspend trading
in its European cocoa futures after the derivatives failed to
develop liquidity since their launch in 2015.
The pullout comes ahead new European Union securities rules
due next January and at a time when the Trump administration in
the United States wants to cut regulation.
Britain's scheduled departure from the European Union in
2019 may also bring a loss of single market access for Britain,
and unlike rival exchanges in Europe, CME does not have a base
elsewhere in the bloc to build on and would have to set up new
operations from scratch.
(Additional reporting by Gus Trompiz in Paris and Tom Polansek
in Chicago; Editing by David Holmes)