CME & LIFFE Form Strategic Partnership

The Chicago Mercantile Exchange (CME) and the London International Financial Futures and Options Exchange (LIFFE) today announced the formation of a strategic partnership between the exchanges. The partnership will bring benefits to customers and members as well as value to shareholders by: providing cross-exchange electronic access to products; providing more efficient trading of short-term interest rate products through cross margining in conjunction with the London Clearing House and a new spread trading facility; forming a for-profit joint venture to develop new products and services to meet the needs of the market. Customers will benefit from a wider choice of products as contracts of each exchange are made available to them via a cross-exchange arrangement. This will enable CME members to access directly LIFFE CONNECT™ and trade eligible LIFFE products. Similarly, LIFFE members will be able to access directly the GLOBEX®2 system to trade CME products. In both cases, access will be available for all market users. The CME and LIFFE are connecting their two electronic trading systems to provide their respective customers with the most efficient way to trade products of both exchanges. Trading in the exchanges' flagship short term interest rate contracts will be made more capital efficient with the introduction of margin offsets and a spread trading facility. This will be between CME's Eurodollar and LIFFE's Euribor futures contracts, the main money market contracts in the dollar and the euro. "With today's agreement, the world's premier exchanges for short-term interest rates provide a linkage that will give our customers innovative global trading opportunities, along with greater market efficiency and cost savings," CME Chairman Scott Gordon said. "This initiative is a critical part of the Merc's strategic plan, complementing our participation in the GLOBEX Alliance, and enabling us to provide even greater innovations in products and services." Brian Williamson, LIFFE's Chairman said, "Nine months ago we set out our strategy to deliver the benefits our customers wanted: international access to a wide range of products, reduction in the overall cost of transacting business and more efficient use of capital. Our partnership with the CME will deliver these and thereby increase value to our shareholders. We will continue to work together to provide additional benefits to our mutual customers." Hugh Freedberg, LIFFE's Chief Executive added, "This agreement will meet the needs of our customers through the innovative use of technology and the provision of a wider choice of products. Our close and long-standing relationship with the London Clearing House has enabled us to provide the valuable benefits of cross-margining between CME's Eurodollar and LIFFE's Euribor contracts." The exchanges will form a joint venture whose makeup will include end users, service provider and other exchanges from around the world. "This joint venture is a direct response to customer demand for a more pro-active way of delivering products and shaping the market and services that they most want in the future," said James E. Oliff, CME Second Vice Chairman and Chairman of its Strategic Planning Committee. "We consider this the blueprint for the future-a commercially governed structure capable of swiftly responding to changes in the market place and combining end-users, service providers and exchanges," Oliff said. "Exchange participation in this type of structure provides additional credibility and neutrality, and, of course, their regulatory, clearing and product integrity."