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Robert Sales
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Montreal Exchange Looks to Break Into the U.K. With Remote Access

The all-electronic Bourse de Montreal is seeking regulatory approval from the U.K.'s FSA to enable London-based brokers to trade the exchange's futures contracts.

The Bourse de Montreal, the all-electronic Canadian futures and options exchange, is seeking to offer remote access to its trading engine to brokerage firms in the United Kingdom. Montreal executives are currently holding talks with officials from the Financial Services Authority -- the U.K.'s regulatory body -- to get the green light to allow London-based broker/dealers to electronically trade the exchange's futures contracts. If the Bourse de Montreal gains FSA approval, it will have the capability to offer remote futures trading to brokers in two countries outside of Canada: England and the United States.

Luc Bertrand, the president and chief executive officer of the Bourse de Montreal, says the exchange has not yet filed an application for remote trading in the U.K. Rather, he says, Montreal officials are talking with FSA officials to get an idea of what the requirements are for the exchange expanding access to its trading engine to brokers in London.

While declining to specify a time frame for Montreal entering into that market, Bertrand says the exchange is confident it will gain acceptance from the FSA -- in part because it went through a similar process when it received approval from America's Commodity Futures Trading Commission last year. In September 2001, he explains, the Montreal Exchange applied for a "no-action" letter from the CFTC, asking for the ability to offer remote trading of its broad-based futures contracts to brokers in the United States.

Five months later, in February 2002, the Bourse de Montreal was granted "no-action relief" from the CFTC, and has since signed up several remote, U.S.-based participants, says Bertand. In fact, U.S.-based brokers now account for between 40 and 50 percent of the exchange's futures volume.

Those brokers, says Bertrand, are remotely trading Bourse de Montreal futures contracts -- both for their own accounts and on behalf of customers -- via tapping into the exchange's so-called SAM trading engine. SAM is actually a customized version of NSC, the engine the Bourse de Montreal licensed from Atos Euronext -- the technology arm of the pan-European Euronext exchange -- a couple of years back.

But while the Bourse de Montreal has been successful in luring U.S. firms to remotely participate in its exchange at a broker/dealer level, it has not yet managed to convince any American entities to sign up as remote market makers. As a remote market maker, a U.S. broker would be responsible for electronically posting two-sided markets on SAM for specific Montreal futures contracts. Bertrand says that the exchange hopes to add remote U.S.-based market makers to its client community in the near future.

Down the road, if the exchange receives FSA approval, that community will also include London-based broker/dealers and market makers. "There's no question that providing proprietary traders of the futures business in Chicago with direct access to our platform is important to us ... (and) our next step is to offer (our trading engine) to U.K. proprietary traders," says Bertrand.

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