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INTERVIEW-CME eyes Q1 2014 for delayed launch of London exchange

Manolo Serapio Jr
Thursday, 5 Dec 2013 | 3:21 AM ET

* CEO says addressing technical issues to push London launch

* Says not in talks with TOCOM on LNG futures

* Says July hacking only affected a few clients

SINGAPORE, Dec 5 (Reuters) - CME Group says the delayed launch of its first overseas bourse could come in London in the first quarter of 2014, as the top U.S. futures market operator intensifies its focus on overseas growth.

CME's London operation, part of its bid to better compete with European rivals such as Deutsche Boerse, was previously set to kick off in September, but has been postponed twice due to technical problems.

"As soon as we tie up some technical details with the Bank of England, we will launch that exchange," CME Chief Executive Phupinder Gill told Reuters in an interview in Singapore.

Asked whether the launch could happen in the first quarter of next year, Gill said: "Very possibly".

The Singaporean took the helm of the Chicago-based company in May last year with plans to make the 165-year-old U.S. futures powerhouse more international.

About 20 percent of CME's daily volumes - which averaged 12.1 million contracts in November - come from outside the United States, mainly from Europe and Asia.

Growth in its Asian business is among the fastest in the company, with Gill saying revenue-growth in the region has averaged 35 percent each year for the past three years. CME's headcount in Asia has expanded by 50 percent over the last two years to 59 currently, with offices in Beijing, Hong Kong, Seoul, Singapore and Tokyo.

"Very decidedly, growth for us as a firm is going to come from outside the U.S.," Gill said on Thursday.

CME's peers appear to be on the same page, with Atlanta-based Intercontinental Exchange acquiring Singapore Mercantile Exchange (SMX) to gain a foothold in Asia, the main growth engine in global commodities markets.

The $150-million SMX purchase, announced last month, came less than a week after ICE sealed its $11 billion takeover of NYSE Euronext.

CME has said it plans to offer foreign-exchange and commodities contracts on its London-based market.

BOLT-ON ACQUISITIONS

CME, which failed in an earlier bid to acquire the London Metal Exchange, now owned by Hong Kong Exchanges and Clearing Ltd, is "not looking at any large-scale merger and acquisition," said Gill.

"What we will continue to do is what I call bolt-on acquisitions, things that are helpful to the current business that we have," he said, citing CME's $126 million takeover of the Kansas City Board of Trade whose wheat futures began pit-trading on CME's Chicago Board of Trade floor in July.

CME is also not in talks with the Tokyo Commodity Exchange to create the world's first liquefied natural gas futures market, Gill said.

Japan's Nikkei newspaper reported last week that TOCOM is in discussions with CME on the project, with the aim of reaching an agreement by year-end.

CME has no immediate plans to open an exchange in Asia, but is looking at its upcoming European bourse "as a proxy for an Asian exchange", Gill added.

"We have a registration for a platform in London ... (but) from the time that exchange is open all our customers in Asia will instantly have access as long as an intermediary that they deal with is connected," he said, noting that trading in parts of the Asian timezone overlaps with Europe.

Turning to its U.S. operations, Gill said a cyber attack on the exchange's swaps clearing service in July, only affected a "very small number" of clients.

CME only disclosed the cyber intrusion in November as the exchange along with U.S. government authorities had to investigate first, Gill said, adding that "no trades were done and no money was moved" by the hackers.

"The reason it took us a long time was there was an investigation and that investigation took a while. Once we were confident that the issue was behind us we made an announcement."

He declined to provide further details, saying the probe is ongoing.

CME said last month that some customer information on CME's ClearPort clearing service was compromised, but that there was no evidence that trades on CME's electronic system were adversely impacted or that CME's other clearing services were disrupted. ClearPort handles nearly half a million contracts a day.

(Editing by Joseph Radford)