August 3, 2015 / 10:00 PM / in 5 years

CME agrees to offer derivatives on Russell indexes

NEW YORK, Aug 3 (Reuters) - CME Group said on Monday it struck an agreement with London Stock Exchange Group to list derivatives contracts based on Russell indexes that are currently listed only on rival Intercontinental Exchange Inc’s market.

The licensing agreement is for 12 years and pertains to futures, options on futures and cleared over-the-counter products based on FTSE and Russell indexes. The financials of the deal were not disclosed.

The deal, which will give CME exclusive listing rights for contracts on FTSE Russell indexes once ICE’s agreement with Russell expires in mid-2017, could represent a $76 million hit to ICE’s earnings before interest and tax, said Diego Perfumo, an analyst at Equity Research Desk. ICE made $3.09 billion in consolidated revenue last year.

“This particular event may be small, but from a strategic perspective, it is a lot more material,” Perfumo said in an interview.

Exchanges have been investing more in indexing businesses and intellectual property as the popularity of passive investing has grown, making indexing data more valuable.

LSE agreed to buy Russell Investments, the owner of the Russell 2000 stock market index, last year for $2.7 billion and now has around $9.2 trillion of assets benchmarked against the performance of its indexes, which include the UK’s FTSE 100.

Derivatives based on the Russell 1000 indexes will be listed on CME in the fourth quarter and will trade on both CME and ICE until July 1, 2017, when they will only be traded on CME.

ICE will keep the exclusive U.S. rights to contracts based on the Russell 2000 indexes until June 30, 2017, after which CME will have the exclusive rights for 10 years.

CME will also list contracts based on the FTSE Emerging Market, FTSE Developed Europe and the FTSE China 50 later this year. (Reporting by John McCrank; Editing by Grant McCool)

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