UPDATE 3-Financial institutions plan new futures exchange

(Adds CME comment, byline)

By Lilla Zuill

NEW YORK, Dec 21 (Reuters) - A dozen financial institutions, including Bank of America (BAC.N) JPMorgan (JPM.N), Merrill Lynch MER.N and Chicago hedge fund firm Citadel Investment Group, have joined together to launch a new futures exchange, a company spokesman said on Friday.

The group also includes Credit Suisse (CS.N), Barclay's (BARC.L) Barclay Capital, Citigroup (C.N), Deutsche Bank (DBKGn.DE), eSpeed ESPD.O, GETCO LLC, PEAK6 and the Royal Bank of Scotland (RBS.L).

The exchange is being formed to create a competitive, low-cost alternative in the futures market. The spokesman declined to say if the group intends to compete directly with CME Group's CME.N Chicago Mercantile Exchange.

CME is the world's largest futures exchange, controlling more than 85 percent of U.S. futures and options-on-futures volume after its July takeover of CBOT Holdings Inc.

A CME spokesman said the exchange "thrives on competition" and would continue to focus on "efficiencies to provide the lowest cost liquidity."

Early next year, the new exchange plans to roll out U.S. Treasury futures as its first product, the spokesman said.

Paul Saltzman, chief operating officer of eSpeed, will become the exchange's acting chief executive.

The group's board will meet early in 2008 to name the venture, and launch a management search.

eSpeed will be the technology provider for the fully electronic futures exchange. (Editing by Richard Chang, Gary Hill)