Cees Vermaas, who took the reins as managing director and CEO of CME Europe in January, is in building mode. On his plate is a plan to expand the exchange’s product line-up and customer base to become a broad-based European derivatives market.
“One of the mandates or objectives we set with the team was to build a community and build the only multi-asset class derivatives exchange in Europe.”
Today, the exchange lists energies ranging from natural gas to power to ethanol and agricultural products that include a euro-denominated cocoa futures contract and fertilizer futures. Vermaas, who spoke with JLN at the IDX Conference in London, said the goal is to have five or six asset classes by mid-2016.
Along with that comes the arduous task of bringing new clearing members on board, getting clearing brokers connected to the platform and ultimately attracting customers to trade these products. In short, Vermaas said this is about “trying to get into the skin of the ecosystems of continental European areas like Germany, France, the Netherlands and Denmark in order to attract more traffic.”
Vermaas said the biggest challenge has been launching a new exchange in the midst of a massive regulatory overhaul.
“The participants are just starting to get familiar with the new world,” he said. “That’s difficult. But with the team here in London, we have time to build the community.”
For the naysayers who believe that CME and other new exchanges will not be able to grow new markets in Europe, Vermaas disagrees. CME’s FX suite is designed to provide a futurized product to the OTC FX space that is under more regulatory oversight.
“Underneath all of this is a real business case,” he said. “Being positioned here in London, facing the biggest OTC markets globally in these types of products as a $2 trillion business, obviously there is room to create a listed derivatives market. It might take a while, but it will be there.”
In other product areas, such as the euro-denominated cocoa contract launched in May, CME is listening to its customers, Vermaas said. The contract’s open interest has topped 1,000 contracts so far, but daily volume is minimal. Natural gas is another example of CME’s goal of bringing OTC products into the listed market.
“It’s an early business cycle and non-cleared, so we anticipate this will be a central order book driven and cleared business,” Vermaas said. “We have the time. We engage clients and we continue to build. This is what we will continue to do over the next one to two years.”
He added that CME Europe is “perfectly positioned to cover time zones in Europe and the US and Asia.”