Once established, CME would be in direct competition with the likes of Eurex and Liffe -- major players in the derivatives exchanges space.
US-based CME today said that it was in the process of applying to UK's Financial Services Authority to set up the derivatives exchange 'CME Europe Ltd'.
Presently, CME operates the Chicago Mercantile Exchange, the Chicago Board of Trade and the New York Mercantile Exchange.
The proposed exchange would initially begin trading in foreign exchange futures products.
"We continue to see an increase in business coming from our diverse set of customers in Europe, with more than 20 per cent of our volume now originating from the region," CME Group Executive Chairman and President Terry Duffy said in a statement.
He noted that having an exchange in London that can leverage the central counterparty model of CME Clearing Europe would also provide additional opportunities to expand its non-US customer base.
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CME Managing Director Products and Services Robert Ray would become become Chief Executive Officer of CME Europe.
"Launching with a suite of FX products allows us to leverage our 40 years of experience in FX futures... We also plan to look at expanding into additional asset classes," CME Group Chief Executive Officer Phupinder Gill said.