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CME Group Executive Chairman Terry Duffy on the decision to launch a derivatives exchange in London and MF Global’s missing funds.
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Group talk about jumping in where everybody's running away the CME group already has about 20% of its business and -- in coming from Europe.
So why not start an operation in Europe they are looking to go full European -- -- derivatives exchange in London.
Joining us now -- a Fox Business this is Terry Duffy the executive chairman of the CME group.
OK -- keep it simple you know going into the UK you would not be the first or the second spirit and -- you want to establish a beachhead here we do what you think is gonna come out of this well.
Couple things let's first of all we -- opened -- for clearing house in Europe last year.
We start clearing some energy swaps and things of that nature so without the natural step was to go ahead.
And file for a -- -- exchange to go ahead compete throughout Europe issues that 20% of our business comes from Europe.
Lot of our foreign exchange clients already headquartered in Europe so we're gonna lead with our foreign exchange complex to start with CL that goes and then we can.
Move that up other asset classes that CME group -- to its clients accountable for.
-- is -- is I don't each time it changes but the last I looked it was a three trillion dollar don't largely unregulated.
Operation where people could jump in and jump out -- with huge the opportunities are great but Deutsche Boerse is already there ICE Euronext is already there.
I'm not -- to say -- be third in what Fox Business we came in after CNBC and Bloomberg and we feel we're doing a better job out there.
But how -- you do things differently and get more clients.
-- my competitors -- just mentioned Liz.
Neither one of them off foreign exchange to an extent CME group has the largest foreign exchange conference in the world.
So first of public -- as a leg up not only in the US but and in Europe also against our competitors secondly competition is good for everybody you know -- -- I think it's made CME group what it is today so.
Whether your first in a third and I don't think it matters is wrong you come up with new innovative products.
For your clients to trade that's exactly what we do and it's not going to be open outcry right of being let out -- of electronic yes.
-- -- -- -- -- You know I I was on the floor for a lot of years and those were wonderful days but none of them be on the markets evolve and markets change -- know the way business is done today.
People want to have access to their own transactions so electronic trading has become the dominant vehicle.
Obviously you've heard all of the news you've watched everything going on with Knight trading in the glitch -- the cost some a lot of money.
We had Howard what -- of Cantor Fitzgerald saying that would never happen to us we have so many stopgap measures put in place and right picture of what -- you could put it may well.
-- I I think there's something that you remember very well in May sixth call the flash crash absolutely and I had to testify -- testify in Washington flash crash when I testified I clearly demonstrated how -- CME group.
We have to functionality and to stop the market what -- stop logic functionality which are offered to every exchange around the world for cost -- order to implement.
If they would have that technology put in place induced in the securities exchanges nature of these problems wouldn't of happened so we can we have a lot of technology -- a lot of more risk controls -- put in place plus we don't have fragment a market like in the securities world those -- and that's another problem.
Would you equity markets so you know technologies being deployed.
When you deployed at CME group it's a lot different what our model do you have a model made of how much you make in the first year with your Forex trading now no I and I don't think we're gonna even look for those projections was right now I've obviously it's a start up we're excited by it and down.
Again like we said 20% of our business and study -- -- -- -- that is forks or your current.
Overseas or how will we -- -- connection lovers in Belfast Ireland so we have some new programs over there what we are hiring some new folks in London to help with the operational weather so pretty exciting.
Let's get to the US -- yes near US based markets and did I guess in 2011 about 3.4 billion.
In trades so.
And we best that in 2012 how how do the numbers start to look at you know one of the things -- I have always been very careful of is trying to predict future dog upset.
And this is something we need to stay away from -- we don't know what's gonna happen the world and I talked our folks again this year and listen all the things that it's 111.
The market ended up in the same exact places started from a 2011 so people spun themselves -- -- -- so come 2012.
We have a fiscal cliff coming and the end of this year we were presidential election with -- diverse opinions -- the government should go.
So lot of people have been on -- volumes of globally internationally have been down that's why it's always hard to predict -- We have talked a lot about MF global -- And of course peregrine I haven't had a chance talk to you don't know peregrine but the current regulatory structure gives the CME oversight responsibility for them.
I know you feel that you should continue to half that yes if you continue to feel that way what.
Changes.
Happy are you making you know make sure that an MF global doesn't happen again they went bankrupt and peregrine what a disaster there got out he's pleading not guilty to 31 counts after he left a note saying.
I'm guilty I did it.
First of all is having is the sort of viewers know -- to be clear.
We were not be oversight for her -- -- but for ever MF global we work.
And we have instituted some new policies in place such as -- what we call the Corzine.
Will now.
So up 25%.
Of the -- -- funds are to be moved -- CEO and the CFO must sign off on it.
There's another thing that we're deploying with the NSA national futures are actually that's actually called the -- we have -- -- the corps' annual about justice CME but actually the CFTC has done to -- So vendors and new will coming out with the enough pay the national futures association which gives us as a DS arrow which is -- designated self regulatory organization.
The ability to look into the accounts to make sure that -- -- the customer segregated funds are there just a look through.
That's one of the other things we've deployed so -- they want it's not going to be like peregrine where they send a note saying can you fill this out and say how much -- how -- and again and elect electrification is exactly what exposed paragraph and if they did not go to work fabrication notices -- maybe still going out.
With the -- they were leading.
Let me go back to Jon Corzine of the Corzine role in the past you've said.
Eat it looks like a crime is committed there Bart -- of the CF Jesse used to work nefarious on our air -- that some type of nefarious behavior over the MF global.
The investigators appear.
Not to be able to find anything right now.
You know -- again I'm gonna leave that up to investigators I will say one thing I testified again a Washington just a couple weeks ago and right before me was -- trustee for the MF global -- and he was asked a very specific question does he believe that Jon Corzine was aware.
Of the money's being transferred from sector accounts into other counts and he believed that his report yes so I think that's a pretty authorities decide not to Terry -- is I would -- be a stretch to believe that there might be civil charges eventually well there's many civil.
Lawsuits already been placed against mr.
Corzine and the other executives so.
While the -- other -- again I I don't wanna get too far ahead of this works I think what's most important for me.
In for the CME group and and our business is to bring the conference back into the system and that's exactly what I've been working on since this -- Thing is unfolded but you know that's well look at and an an but the authorities to deal with mr.
-- -- Well let your record stand firm through the Lehman drama through -- -- -- the flash crash the CME has held up as a bastion of.
Orderly trading we have Liz and I think that's very important to note this is one that is have been a very difficult year in our industry but -- We are going to recover from this that we are going to move forward we are going to be instill confidence back in -- marketplace.
We have a want to new things put in place and we are gonna continue everything's on the table right now.
I think this was critically important to so there's no bad ideas right now.
As we finish up be staying at the Helm of the CME I am.
I have a signed on for an additional three and a half years now I've signed new contracts so when did you do that I did that in January I'll be there for four years from January at least Terry -- great to see you will be watching as you launch the new UK based business thank you -- I can assure you I appreciate you have me has always a pleasure -- are always welcome at the Fox Business.
