CME Forms Partnership Abroad

Terry Flanagan

Exchanges have been more active in forming strategic partnerships and alliances with other financial institutions as an alternative to consolidation.

Chicago’s CME Group becomes the latest exchange to form a cross-border strategic alliance. It announced last week that it had entered into a memorandum of understanding to explore and potentially collaborate in a long-term business relationship in a move to expand both companies’ respective businesses.

“With the increasing openness and sophistication of China’s futures markets, CME Group believes in the value of cooperating with leading institutions like Bank of China and its subsidiaries as they provide education on CME Group products and services to their expanding customer base,” said Phupinder Gill, CME Group President. “This agreement will lay the foundation for what we hope will be a long and successful relationship between our companies.”

The non-binding agreement provides for the establishment of information-sharing links which cover education, training and marketing. In addition, the companies will focus on future business opportunities facilitating cross-border trading in commodities futures and options, subject to the applicable regulations.

Founded in 1912, Bank of China is the oldest bank in China, and is one of the “big-four” state-owned commercial banks in the country, along with China Construction Bank, Industrial and Commercial Bank of China, and Agricultural Bank of China.

“CME Group continues to build strong relationships with market participants and leading exchanges around the world,” added a CME spokesperson. “Our partnerships enable us to bring efficiency to market participants globally and expand their opportunities to effectively manage risk and diversify investments.”

Another high-profile exchange/financial institution partnership was formed last year between U.S. exchange operator Bats Global Markets and Claritas, a Brazilian asset management firm, to explore opportunities in the Brazilian market, including the potential creation of a new exchange.

NYSE Euronext is working with the Tokyo Stock Exchange in a partnership whereby they will each offer interconnectivity between each other’s trading platforms. The mutual connection between the TSE and NYSE is formed between the TSE’s Arrownet and NYSE’s Secure Financial Transaction Infrastructure. New services to utilize the new infrastructure are planned for the second quarter of 2012, and the connection between the two networks has already been installed. NYSE Technologies has since been distributing TSE market data.

The connection is one of the latest in a line of cross-border connections to be formed between exchanges. Deutsche Borse recently announced the formation of a mutual development partnership with the Istanbul Stock Exchange, under which the two exchange operators will work together in several business areas, including the development of new research and technology, assisting each other in marketing efforts, as well as introducing joint indices, in an effort to create a closer cooperation between Frankfurt and Istanbul.

The Tokyo Stock Exchange and the Korea Exchange formed an agreement, whereby the two exchanges will offer each other’s stock quotes on their respective web sites. In the future, they will also look to jointly develop trading infrastructure to allow members to more conveniently place orders on each other’s exchanges, as well as the potential for cross-listing of ETFs and derivatives products.

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