Reuters and CME launch forex market platform

LONDON (Reuters) - Reuters Group RTR.L said on Monday it had launched its FXMarketSpace trading platform joint venture with the Chicago Mercantile Exchange CME.N as part of a drive to tap the fast-growing global currency market.

FXMarketSpace is a centrally cleared, global foreign exchange platform for the over-the-counter market that allows deals to be processed anonymously.

The venture, which aims for a slice of the foreign exchange market valued at one trillion pounds a day, has not been widely added into analysts' valuations on Reuters, although a growing number have recently begun estimating what impact the business will have.

Many analysts predict average daily foreign exchange turnover could hit $3 trillion (1.5 trillion pounds) by the end of this year, fuelled by hedge funds, prime brokers and automated trading.

Broker ABM AMRO earlier this month said FXMarketSpace could add between nine and 92 pence to the share price of Reuters depending on the market share the two companies achieve.

Reuters and the CME have estimated that FXM needs around $40 million of revenue -- roughly two percentage points of market share -- to break even, and this is expected to occur in 2008.

Morgan Stanley analysts said in a note late last week that it valued Reuters' 50 percent stake in the venture at a base case of 31 pence per share and a bull case of 50 pence per share.

"The proposed venture has a highly scalable business model with a largely fixed cost base. The key is the extent to which FX MarketSpace will be able to attract volume," the broker said.

The two businesses created the platform in May, 2006, and said they would have it up and running by the end of this month.