Eurex's FX business hangs in the balance

Preuss was speaking at a press conference on the 70% stake sale of the Frankfurt-based exchange's holdings in its US subsidiary, Eurex US, to Man Group last Thursday (July 27). As part of the deal – expected to close by early September – Man will buy the stake for $23.2 million in cash and will make a capital injection of $35 million into the US exchange.

Preuss said that the German exchange is currently re-evaluating how to progress with the segment of FX product, as part of its overall product strategy. "We will reconsider, re-evaluate and then decide what we are going to do with the segment of FX products," said Preuss. "They [traded volumes of the products] are of a size that cannot be considered to be convincing to us at the exchange at this time."

Kevin Davis, chief executive of Man Financial, added that the exchange will not duplicate existing markets on other exchanges. He said the brokerage is the largest executing and/or clearing member of most North American and European derivatives exchanges.

"We have fabulous businesses on those exchanges and we have no intention of trying to destroy those businesses by cannibalising those markets, and transferring them on to ours," he said. "This is about innovation. It's not about trying to transfer our business from one market to another."

Davis added that it would be a mistake to use Eurex US' past experience as a guide for the future. "But in general terms, we would seek to innovate and incubate innovative new products."

He declined to provide details on future products being developed for the exchange but said that they will listed in the first quarter of 2007. He said that the exchange is already in discussions with various parties, such as hedge funds and its global retail sales network, about some of those products.

"What's driven us [to team up with Eurex] is a common desire to broaden the range of products available to retail and to the hedge fund community," he said.

The initiative will use a three-pronged strategy encompassing retail, hedge funds and an open architecture platform.

Davis said the companies intend to create new innovative products in North America and abroad, most particularly in the Asia-Pacific region, for the retail trading community.

He added the exchange also intends to bring in new hedge fund partners and other financial institutions to collectively develop new products that are relevant to that market segment.

Meanwhile, the open architecture strategy invites "any credible financial institution with a credible product idea to list their product on this platform". The companies will allow the financial institution to keep the majority of the value of that product after covering the costs.

Eurex US has also been rebranded US Futures Exchange.