CME expands volume discounts as Rival ELX readies

CME Group Inc., the world’s largest futures market, will offer volume discounts to traders on several contracts as competitor ELX Futures LP prepares to begin Treasury futures trading this month.

Beginning Aug. 1, investors will be charged according to the aggregate of their trades across products in the interest- rate area such as Treasury futures, Chicago-based CME Group said in a statement today. Fees for trading Eurodollar futures, the most widely used financial-futures contract, won’t change, CME Group said.

ELX received regulatory approval last month from the Commodity Futures Trading Commission and plans to start trading two- and five-year notes, the 30-year bond and long-term Treasury notes. The company will charge 9 cents per Treasury contract for traders buying or selling more than 400 a day, according to its Web site. For fewer than 400 contracts, traders will be charged 24 cents per transaction, ELX said.

“If ELX members were primarily interested in driving down CME prices through the launch of an alternative Treasury futures venue, it appears to have been effective prior to launch,” BMO Capital Markets analyst Michael Vinciquerra wrote in a note to clients today.

Investors will now pay 5 cents per Treasury future trade at CME Group, down one cent for orders under 15,000 per day, Vinciquerra said.

Discounts to Expand

CME Group, which fended off competition to its Treasury market by Eurex AG in 2005 by slashing fees, also said it will expand its volume discounts to small-sized equity index products beginning Sept. 1. For currency futures and options, as of Aug. 1 the company will average a trader’s monthly total to apply a discount above a certain threshold and will reduce block trading fees effective July 1, according to the statement.

In agricultural commodities such as corn and wheat, CME Group said it will standardize fees for members who hold equity positions in the exchange and for individual traders. The fee changes don’t apply to energy and metals contracts traded on the New York Mercantile Exchange and the Commodity Exchange, which CME Group bought last year.

“In general, it seems to us that the exchange has raised fees in its agriculture, equity standard and floor-brokered products pretty much across the board,” Vinciquerra wrote in his note. He said the effect on the exchange’s revenue from the cost changes are “difficult to discern,” although CME Group “believes on a net basis, the changes will be just slightly positive.”

CME Group rose $4.56, or 1.4 percent, to $336.14 as of 10:46 a.m. in Nasdaq Stock Market trading. The shares have risen 61 percent this year.