CME looking at launching London futures exchange

NEW YORK Wed Mar 2, 2011 5:55pm EST

NEW YORK (Reuters) - CME Group Inc (CME.O), parent company of the New York Mercantile Exchange, the world's largest oil trading bourse, is looking at launching a futures exchange in London in a bid to capture more emerging market business, the company's CEO said on Wednesday.

Chief Executive Craig Donohue told the Reuters Future Face of Finance Summit on Wednesday that London featured in his company's plans for futures as well as over-the-counter trade, as CME looks at a market that has benefited from its relative proximity to Asia.

"I would imagine London will be among the places that we will examine," Donohue said.

"We have fairly significant ownership stakes in a number of countries like Malaysia and Dubai so we are also going to be looking, and I think London will be included in that, to think about more flexible arrangements for CME group on a going forward basis."

Donohue didn't say how advanced plans were, but CME gained regulatory approval in December for a European clearinghouse in London that is set to launch later this year.

CME Clearing Europe, which will focus on OTC trade and energy swaps, will offer the company "long-term strategic flexibility," Donohue has said, adding on Wednesday that 20 banks have already agreed to participate.

NYMEX's major rival, the London-based ICE Exchange (ICE.N), has captured a growing share of combined crude and product futures volume in recent years, and could be set to overtake NYMEX as the number one oil trading hub in 2011.

A move into the London commodities market could significantly raise the stakes for CME and ICE as they compete for market share.

Underscoring the challenge facing CME, its main rival for interest-rate futures, NYSE Euronext, also operates a London exchange, and Deutsche Boerse's (DB1Gn.DE) planned acquisition

of NYSE would create a dominant futures business there.

Donohue said he is cool to the idea of joining in with the rash of industry mergers, preferring to remain focused on existing growth strategy.

London has been better positioned geographically to take advantage of booming demand for commodities in Asia, while stricter regulation in the United States in the wake of the financial crisis has also encouraged some to trade elsewhere, according to many traders and analysts.

Donohue said on Wednesday that regulators in the United States risked going too far and they did not know the full economic implications of plans to introduce position limits for commodities like crude oil.

"Global capital really does shift pretty easily," Donohue said. "We're pro-regulation ... (but) we do run the risk we'll see business shift away from the United States."

(Additional reporting by Ann Saphir, Jonathan Spicer and Paritosh Bansal; Editing by Steve Orlosky)

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