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Best Derivatives Trading Platform
Launched in April 2014 with a handful of foreign exchange derivatives, the Chicago Mercantile Exchange’s European presence has been growing slowly but steadily. In December 2015, it announced that it had exceeded one million lots traded since its launch and the exchange now offers energy and agricultural contracts in addition to its base in currency futures. Most recently it has broadened its offering by adding Italian and Dutch natural gas futures as well as further fertiliser futures. Based in London, it has a strong board, including Michael Blair QC and electronic-trading specialist Mark Spanbroek, and it offers dedicated clearing through its CME Clearing Europe central counterparty. Quite how it will be affected by Brexit remains unclear – the exchange does offer trading in euro-denominated contracts and futures on commodities from EU nations. However, its overall market share remains small compared with its larger European competitors such as the Intercontinental Exchange and Euronext.
Deutsche Börse’s derivatives arm has been a successful enterprise for the Frankfurt-based group, posting revenue growth of 27% in the group’s 2015 financial report, and benefiting from a period of volatility in June that saw 207.7 million contracts traded through the course of the month. The business has also added a number of partnerships and products this year, including Korean index futures and direct connectivity with Bloomberg’s electronic trading service for over-the-counter derivatives. In 2015, more than 1.7 billion contracts were traded on Eurex, marking an increase of 200 million from the previous year. Eurex, perhaps more than its competitors, will also stand to benefit in the coming years as the UK exits the EU, with monetary authorities keen to keep euro-denominated derivatives trading within the eurozone.
ICE Futures Europe
ICE Futures Europe is the indisputable king of oil trading in Europe, having 50% of crude and refined oil futures trading on its market, along with Brent crude and gasoil benchmarks. It is also huge in short-term interest-rate futures and options and is the dominant player for soft commodities trading in London, including cocoa, coffee, sugar and wheat contracts. While it is not as big a player in equity derivatives as its competitors on the continent, it does offer single-stock futures and index derivatives based on MSCI, FTSE, Russell and others. It has also continued to innovate in derivatives products, including swap futures, where its ICE Eris Euribor contract achieved record volumes of 8,185 contracts in July 2016, far outstripping the previous record of 1,719, set in June 2016. As the spiritual inheritor of the London International Financial Futures Exchange, which ICE bought at part of its purchase of NYSE Euronext in 2012, ICE Futures Europe is firmly rooted in London.
London Metal Exchange
The LME, currently the largest market in the world for options and futures contracts on metals, has a long history, tracing its roots back nearly 500 years. It is also one of the few remaining western exchanges that has an open-outcry system of trading, known as ‘the ring’, still in place. Indeed, the exchange opened a pit in February 2016 after moving to London’s Finsbury Square from Leadenhall Street. While it describes open outcry as being central to price discovery at the LME, the exchange has also been forced to adapt its practices – its Select electronic market continues to evolve, accepting Jump Trading as a member in June 2016, one if its first direct electronic trading firm memberships. It also published a market-wide consultation in July on capping charges for warehouses, where the physical product is stored, a long-standing complaint in the metals market. It is hoping to publish its conclusions by September, with changes coming into place in 2016. It also launched LMEShield in April 2016, a form of electronic receipt system for commodities markets.
Operated by interdealer broker Tradition, Trad-X was launched in 2011 to help bring more electronic and transparent trading methods to the interest-rate swap market. The platform facilitates more than 10 million orders each day and connects to over 150 trading institutions with continuous streaming of two-way markets for more than 250 of the most liquid interest-rate swap players by market size – covering USD, EUR and GBP swaps. As a result, it has become a major contributor for the majority of Ice Benchmark Administration’s benchmark methodologies which are underpinned by actual trading. It also become one of the first platforms to launch a central counterparty switch service, enabling banks to switch between clearing houses when cost and margin discrepancies arise. Over the past 12 months, that switch platform has undergone a series of technological enhancements designed to improve trading performance for the end-user.