NYX Nyse Euronext

Startup exchange ELX Futures on Wednesday sent a letter to U.S. futures regulators, charging that CME Group Inc. (CME) accepts trades that move positions out of its clearinghouse--something CME has said it forbids.

ELX is pressing the issue after getting regulatory approval last month for a rule that would let market participants arrange to move Treasury futures positions from CME to ELX.

The consortium-backed ELX is challenging CME's dominance in U.S. Treasury futures trade, in which ELX claimed 2.8% of the market in October, and the exchange sees the rule potentially bringing new business to its markets.

In a letter to the Commodity Futures Trading Commission, a copy of which was seen by Dow Jones, ELX Chief Executive Neal Wolkoff included a screen shot of what he said was an example of so-called transitory trades in crude oil futures, moving positions between CME's New York Mercantile Exchange unit and IntercontinentalExchange Inc (ICE).

A CME spokesman said late Wednesday that the trade in question represented a so-called switch trade, an ordinary occurrence in the company's energy markets.

"Since ICE uses CME Group settlements for our benchmark WTI crude oil contract, customers need to switch into futures contracts to gain convergence to the futures before expiration," the spokesman said.

CME's legal department maintains that the Chicago-based exchange operator isn't required by regulators to accept trades made for the purpose of shifting Treasury futures positions to another clearinghouse, under its authority as a designated contract market, and that CME has a long-standing policy of prohibiting the sort of transitory trades covered by the ELX rule.

CFTC Chairman Gary Gensler declined to weigh in on the issue during an appearance in Chicago last month. CFTC officials said they were reviewing the letter and had no immediate comment.

ELX's so-called Exchange of Futures for Futures rule, or EFF, would let investors offset positions held at the two markets, according to ELX, while helping traders avoid margin calls where there is no market risk.

Market participants looking to do an Exchange of Futures for Futures transaction would privately negotiate to buy and sell contracts on two exchanges, then report the transaction to the exchanges' clearinghouses.

"Our letter is a formal request for the commission to act and to put the CME in its proper place, which is as a regulated entity, not a regulator," said Wolkoff, ELX's chief executive. "This letter is simply intended to provide additional information around which that decision by the CFTC can be more thoughtfully made."

Wolkoff said he has spoken to market participants interested in moving Treasury futures positions between CME and ELX.

But the prospect of disciplinary action has stymied any attempt at doing such a transitory trade until there is legal certainty from the CFTC, Wolkoff said. The screenshot was obtained from a trader at Wolkoff's request, he said.

-By Jacob Bunge, Dow Jones Newswires; (312) 750 4117; jacob.bunge@dowjones.com

Grafico Azioni NYSE Group (NYSE:NYX)
Storico
Da Giu 2024 a Lug 2024

Grafico Azioni NYSE Group (NYSE:NYX)
Storico
Da Lug 2023 a Lug 2024