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Derek Sammann replaces Rick Spears at the CME |
The creation of the FXMarketSpace joint venture with Reuters has resulted in the effective departure from the Chicago Mercantile Exchange of the senior management team running the exchange’s foreign exchange product line. With the appointment of Derek Sammann as its new managing director, FX products, the CME has gone some way to filling the void. Sammann, who is an experienced FX hand, is a direct replacement for Rick Sears, who has moved to FXMarketSpace as president and chief sales officer, along with Bryan Hunter, who has gone as chief operating officer. In his new role, Sammann will report to Rick Redding, managing director, products and services, at the exchange. Previously, Sammann was managing director, global head of FX options and structured FX products at Calyon Corporate and Investment Bank in London, which he left at the start of the summer. In a press release, CME said that Sammann “will be responsible for executing CME’s global FX growth strategy, which includes expanding the company’s global client base, enhancing the FX options offerings on CME Globex and further developing CME’s core FX business”.
Some industry participants have been speculating about how the CME will differentiate itself from FXMarketSpace, once the joint venture is up and running. Given Sammann’s background, the obvious conclusion is that the exchange will make a concerted effort to boost activity in its FX option contracts.
Turnover in these has seriously lagged the stellar growth rates of the CME’s futures contracts. Average daily turnover in FX futures, in notional amounts, has surged from just $6 billion in April 2001 to $46 billion in August 2006. In contrast, the average daily value of option contracts traded has remained stagnant at just $1 billion. This is also in sharp contrast to the growth in the over-the-counter FX options market, where daily volumes almost doubled from $60 billion in April 2001 to $117 billion in April 2004. The market has continued to grow since then, with the Bank of England reporting in its semi-annual surveys a further 25% expansion since April 2005.
After many false dawns, many market participants are now starting to believe that options, particularly vanillas, could well be poised to make the move to electronic trading. Several banks report that there has been a good increase in the volume of options trading electronically. The CME has made no secret of its belief that options generally offer an area of huge potential. In the past few years, it has listed European-style contracts to bring its options more closely into line with the OTC market – although the way these are settled is arguably still too complex – and also put them on its Globex trading platform. Time will tell if Sammann’s appointment marks the start of a fresh attempt to get the exchange’s option business up to the same speed as its futures operation.
