The Chicago Board Options Exchange and the Chicago Mercantile Exchange Inc. today signed a letter of intent to create a joint venture to introduce single-stock futures, following approval by the boards of directors of both exchanges.

The Montreal Exchange led the charge into single-stock futures earlier this year. Although the battle will well and truly have begun once the world’s largest options exchange and the largest futures exchange in the United States team up. The Chicago Board of Trade has also agreed to participate in the joint venture with a limited stake.

“Today’s announcement highlights the innovation and entrepreneurial spirit among Chicago’s exchanges,” said CBOE chairman and CEO William Brodsky. “This exciting new initiative combines the best of securities and futures trading. Our willingness to work together on this venture will ensure that Chicago remains the world’s center in derivatives trading and risk management.”

“The creation of this joint venture recognizes the tremendous synergies of CME and CBOE, making us a formidable competitor in the global marketplace for single-stock futures,” said CME chairman Scott Gordon. “Our complementary customer bases of retail and institutional investors will benefit from the efforts of all three Chicago exchanges to establish deep pools of liquidity in these products.”

The joint venture will be a for-profit company, will have its own management and board, and will be separately organized as a regulated exchange. Single-stock futures will be traded electronically, and orders may be entered through either partners’ electronic trading systems.

Single-stock futures are expected to bring new efficiencies to securities trading, securities lending and corporate hedging activities. CME and CBOE officials said they also expect to develop rules that would accommodate block trading and exchange-for-physicals. Single-stock futures have not been allowed in the U.S. for 18 years, but legislation signed into law in December will now allow it.