By Samuel Agini
Of Financial News
London Stock Exchange Group PLC (LSE.LN) and a group of banks have put another 20 million pounds ($26.3 million) into a derivatives-trading venture they hope can challenge the dominant forces in European interest-rate futures.
CurveGlobal has raised the money to provide working capital and fund future growth, the LSE confirmed. It is CurveGlobal's first funding round since February 2018, when it also raised GBP20 million.
The LSE, which owns around 43.4% of CurveGlobal, launched the joint venture with a number of major banks and Chicago-based exchange Cboe Global Markets in September 2016.
According to LSE data, roughly 5.6 million interest-rate derivative contracts changed hands on CurveGlobal in the first 11 months of 2019--an 85% year-on-year increase despite weaker volumes in October and November.
However, Curve is dwarfed by U.S.-headquartered Intercontinental Exchange ICE Futures Europe and Deutsche Boerse AG's (DB1.XE) Eurex.
London-based ICE Futures Europe traded 489.4 million interest-rate derivative contracts in the first 11 months of 2019, while the figure for Eurex was just under 518.0 million, according to their websites.
Andy Ross, chief executive of CurveGlobal, told Financial News: "It would be churlish to say that when you're competing against some of the biggest exchanges in the world that it isn't difficult. I'm delighted by the number of people joining our market, buy-side and sell-side."
Mr. Ross added that the majority of shareholders contributed to the latest fundraising; partner banks on the project are Bank of America, Barclays, BNP Paribas, Citigroup, Goldman Sachs, JPMorgan and Societe Generale.
The LSE lacks a derivatives-trading operation with scale, having lost out to Euronext N.V. in 2001 in a battle to acquire Liffe, a London-based futures and options exchange. Liffe now sits within U.S.-based ICE following a number of subsequent deals in the exchange sector.
Now into its fourth year, CurveGlobal has sought to grow activity on its market by introducing an "all you can eat" fee model. Typically, exchanges charge commission on trades rather than offering unlimited trading for a subscription fee. CurveGlobal offers both options.
The platform also started with the promise of helping banks use their capital more efficiently. Its contracts clear at LCH, the LSE's majority-owned clearing house, which offers them access to a single default fund across over-the-counter and listed trades. Banks have been hit by tougher capital requirements since the financial crisis, increasing the cost of trading.