NYX Nyse Euronext

NYSE Euronext (NYX) on Monday cemented a relationship with stock index company MSCI Inc. (MSCI), granting the exchange operator exclusive rights to trade futures tied to benchmarks for European, Asian and emerging markets.

The agreement will see NYSE Euronext over the next year consolidate trading in the contracts on its still-small futures platform Liffe US, as MSCI aims to wind down an existing relationship with much larger CME Group Inc. (CME) by June 2011.

"We still have a long way to go, but this proves that if you do things that make sense...there is a possibility to start building markets away from the only other game in town right now," said Marco Bianchi, head of business development for NYSE Liffe US.

The upstart exchange is looking to build a derivatives franchise around the MSCI indexes, which are tracked by asset managers, pension plans and other institutions; futures contracts on the anticipated value of the indexes let funds guard themselves against potential fluctuations in the market, or take a view on the economic fortunes of a sector or specific region. An estimated $3 trillion in assets is benchmarked to MSCI measures globally.

NYSE Euronext also is talking to MSCI about listing options contracts on the indexes, which would trade on the operator's two options platforms, according to Bianchi.

NYSE Liffe US introduced its first futures on MSCI indexes last fall after forging a licensing agreement covering 41 benchmarks, though volume has been light relative to much more heavily traded contracts tied to the S&P 500 index and Dow Jones Industrial Average, both of which are exclusively listed at CME Group.

While CME will lose its contracts linked to MSCI benchmarks following the expiration of June 2011-dated contracts, there is likely to be minimal effect to its bottom line.

MSCI products contribute only about 0.2% of CME's overall trading activity in stock index futures, and their average volume of about 6,500 contracts per day this year falls far short of the 2.5 million contracts traded daily in CME's S&P index futures markets.

"We continue to offer tools and research designed to help our customers identify efficient, relevant applications of our products that suit their business needs," said a CME spokesman.

Bianchi said that since launching MSCI-based contracts last fall, NYSE Liffe's share of trading has been about 25% to 35% in those that also trade at CME, where they have been available for several years.

Monday's move by NYSE Liffe US to become the sole destination for MSCI-linked futures highlights the growing importance of alliances between exchanges and index providers.

In 2007, CME ceded rights to the Russell 2000 index to rival IntercontinentalExchange Inc. (ICE), which has expanded the range of contracts tied to Russell measures.

This year, CME bought a 90% ownership stake in the Dow Jones family of indexes, solidifying its hold on derivatives products tied to the Dow Jones Industrial Average and opening up a new business in shopping market measures to international exchanges.

Dow Jones & Co., the publisher of this newswire, is owned by News Corp. (NWS, NWSA).

-By Jacob Bunge, Dow Jones Newswires; 312-750-4117; jacob.bunge@dowjones.com

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