Reuters and the Chicago Mercantile Exchange are teaming up to create FXMarketSpace, the world’s first centrally cleared, global foreign exchange marketplace through a new 50/50 joint-venture company.

Through the joint venture, CME and Reuters will pool their expertise in data dissemination, distribution, trade matching and central counterparty clearing services. FXMarketSpace will offer market solutions to capitalize on the growing demand for broader access to the FX market, the emergence of FX as an asset class, the growth of non-bank financial institutions in global FX markets and the growth of electronic and algorithmic trading.

FXMarketSpace’s trading model will provide broad global distribution through Reuters’ desktop community in FX, CME clearing firms and selected independent software vendors; trading anonymity; transparent and competitive prices on the CME Globex platform; central counterparty clearing services, through CME Clearing; and, straight-through processing, increased operational efficiencies and lower costs.

Reuters and CME have begun development of the network platform and expect the venture to launch in early 2007. The formation of FXMarketSpace is subject to certain regulatory and shareholder approvals and other customary closing conditions. Certain joint venture activities will be subject to regulatory approval of Britain’s Financial Services Authority, and is expected in early 2007.

The FX MarketSpace business plan requires each party to contribute capital of up to US$45 million to fund the venture through to profitability. The business plan anticipates two roughly equal amounts of capital contribution in 2006 and 2007.

CME and Reuters expect their respective shares of start-up losses to be US$20 million-US$25 million, with around US$5 million of this expected in 2006. The joint venture is expected to achieve profitability during 2008.

CME will provide clearing and trade matching services to the joint venture, and Reuters will provide trading access to, trade notification services for, and distribute market data from, the joint venture over its network, among various other services and arrangements by and with the two companies.

“Our agreement with Reuters heralds a new era in the global FX market,” said CME chairman Terry Duffy. “Today CME and Reuters are addressing the needs of the current FX marketplace by establishing the first electronic trading platform that offers anonymous, cleared trades to the $2 trillion over-the-counter FX market. By leveraging the expertise of two of the leaders in FX trading, we believe this innovative platform will create new opportunities for all FX market participants and generate value for our respective shareholders.”

“We see exciting prospects for growth in the global FX markets as the range of participating financial institutions broadens,” added Tom Glocer, Reuters’ CEO. “We are pleased to be working with CME as our preferred partner to extend our FX business and help shape the evolution of the FX markets. We are committed to providing our customers with a choice of trading services for their foreign currency activities.”

“Global FX markets, already the world’s largest market in terms of daily turnover, are poised for continued growth and change,” said CME CEO Craig Donohue. “We believe that FXMarketSpace is perfectly positioned to capitalize on this growth potential by offering bank and non-bank participants, an efficient, anonymous and centrally-cleared alternative to the current spot and forward markets.”