CME denies tie-up with ICDX

Chicago-based CME Group, the world's largest and most diverse derivatives exchange, yesterday denied any direct engagement, collaboration or tie-up with the Indonesia Commodity & Derivatives Exchange (ICDX).

CME reaffirmed that it has "deep respect for its existing partnership with Bursa Malaysia".

"We refer to the news reports suggesting alliance of some sort between CME Group and ICDX and we would like to categorically state that we did not enter into any agreement with ICDX.

"The reports were inaccurate because we do not have any direct engagements or discussion with ICDX on any joint offerings of our products," CME Group managing director Timothy Andriesen said at a press conference held on the sidelines of the Palm and Lauric Oils Outlook Conference (POC) 2011 in Kuala Lumpur.

"Bursa Malaysia is our key and strategic partner in this region. It would be bad faith on our part if we were to offer any products where Bursa Malaysia is not involved," Andriesen added.

In 2009, CME Group and Bursa Malaysia swapped shares to promote the trading of palm oil contracts. The following year, the tie-up resulted in CME Group launching its dollar-denominated contract. There was also the listings of all existing Bursa Malaysia Derivatives products like FCPO, FUPO and FKLI on the CME Globex.

CME Group, which clocks in a daily trading volume of around nine million contracts, consists of the Chicago Mercantile Exchange, Chicago Board of Trade (CBOT), New York Mercantile Exchange (Nymex) and and Comex. It is the world's largest derivatives exchange for grains, livestock, oilseeds, dairy and timber.

Commenting on the lacklustre performance of the CME Group's US dollar-denominated palm oil contracts compared with ICDX's rising rupiah-denominated palm oil volume trade, Andriesen said: "Yes, the dollar palm oil contract got off on a slow start but we're very optimistic of its potential. You must remember that our contract is tied to Bursa Malaysia's palm oil futures, the global benchmark pricing for the commodity".

On how CME Group plans to generate more trade in the US dollar-denominated palm oil contracts, he said it is constantly looking to better its marketing and communications with its clients. It is also considering appropriate pricing, he added.

Andriesen said lowering the fees is one of the many tools the group was considering to attract traders to use its palm oil contracts.

Meanwhile, in response to CME Group's denial, ICDX chief executive officer Megain Widjaja clarified that the current confusion in news reports boils down to "a misunderstanding and perhaps, misinterpretation". Widjaja said he had never intended to confuse anyone about ICDX's planned expansion reach and accessibility to offshore products like those offered by CME Group.

He reiterated that the Indonesian government had recently passed new laws that would allow domestic traders to access foreign markets.

Overseas trading had been previously executed by a combination of phone broking and overseas accounts.

"What I meant to say is Indonesian participants can use ICDX to trade offshore products," Widjaja said. "The system was up-and-running as of last week and a few brokers have already signed up. If traders in Indonesia want to trade CME Group products, the ICDX is the platform and if CME Group wants business from Indonesia, this is one of the ways to go forward," he explained.

He pointed out that the new development in Indonesia does not involve any alliance with CME or Nybot - the New York Board of Trade, a commodity exchange operated by Intercontinental Exchange (ICE), a CME rival. However, through ICDX, traders in Indonesia will get direct access to CME and Nybot, Widjaja added.

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