NYSE to launch direct challenge to CME on March 21

WASHINGTON/NEW YORK Wed Mar 2, 2011 4:14pm EST

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WASHINGTON/NEW YORK (Reuters) - NYSE Euronext <NYX.N will launch its long-awaited challenge to CME Group Inc's (CME.O) lucrative interest rate futures franchise on March 21, the exchange operator said on Wednesday.

The launch highlights the importance of the derivatives business to the operator of the world's best known stock exchange, which agreed last month to be taken over by Germany's Deutsche Boerse AG (DB1Gn.DE). The combination would dominate European futures trading, even as the NYSE tries to win a foothold in U.S. futures, where CME is the biggest player.

Regardless of the ultimate winner in the U.S. market for rates futures, it is already clear the battle could dramatically pare traders' costs.

NYSE's co-owned clearinghouse, New York Portfolio Clearing, (NYPC) will use a cross-margining arrangement with its co-parent, the Depository Trust and Clearing Corp, to slash costs for traders who buy and sell in the cash and the futures markets at the same time.

CME, whose Chicago Board of Trade and Chicago Mercantile Exchange units have dominated interest-rate futures since they invented them decades ago, is maneuvering to keep its franchise. On Monday, it put forth a plan to offer cross-margining and save traders money.

"Imitation is the highest form of flattery and we think we're onto something here," Walt Lukken, NYPC's chief executive officer, told reporters in a briefing.

CME said its margining plan would slash as much as 65 percent off the money that traders must put up to back simultaneously held positions in Treasury securities and futures. NYPC said savings would likely run in the 15 percent to 30 percent range and cautioned the CME's plans were too short on detail to adequately assess.

CBOT has successfully fended off several challenges to its interest-rate futures business over the years.

(Editing by Steve Orlofsky; editing by Andre Grenon)

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