BOCA RATON, Fla. Participants at the annual Futures Industry Association conference March 12-15 agreed that CME Group Inc., the worlds largest derivatives market, is the exchange everyone loves to hate.
CME is not the 800-pound gorilla, its the 1,000-pound gorilla and is only getting bigger. When they close their Nymex (New York Mercantile Exchange) acquisition, theyll control 96% of all exchange-listed futures trading in the U.S., said an industry source at the FIA. This really raises anti-competitive issues. CME executives are arrogant. CME is the exchange everyone loves to hate, and for good reasons.
Chicago-based CME and NYMEX Holdings, the parent of the worlds largest energy market, are in merger talks through March 15 and expected to announce a deal within days. Nymex already uses the CMEs Globex platform to trade most of its contracts electronically under an exclusive agreement, which makes any counter offer unlikely.
The animosity between the CME and the industry goes back a year, when CME executives were caught off guard at the FIA conference by IntercontinentalExchange Inc.s bombshell announcement of a counterbid for the Chicago Board of Trade, which the CME had already proposed to acquire. CME eventually did acquire the CBOT.
But since the ICEs bid, the FIA which mostly represents futures brokers, and some of the CMEs largest customers has steadily voiced support for more competition in futures trading, which is dominated by an exchange with a de facto monopoly.
As a result, the CME did not exhibit at the FIA Expo last November in Chicago and was noticeably absent at this years FIA conference, which the exchange has always sponsored. In addition, the CME did not take part in the March 10-12 risk-management conference in Bonita Springs, Fla., an event the company usually co-hosts with the Chicago Board Options Exchange.
The CME is part of a class-action suit that former CBOT members have filed against the CBOE over rights they say gives them a claim to the windfall a CBOE initial public offering would likely yield. The CBOE was founded in 1973 with the backing of CBOT members.
The case is still pending in a Delaware court. Attempts to reach a settlement in the case, for which the CME is bankrolling legal costs on the former CBOT members side, collapsed earlier this month.
CME executives have decided they are at war with everybody else in the industry. They behave as if the world does not exist beyond Chicago. Its a very insular approach, said another industry source, who asked not to be named and mentioned Fortress 20 South Wacker, the CMEs headquarters address, as the exchanges new nickname.