all about cryptop referances
According to a recent report, the world’s largest derivatives exchange CME Group wants to register as a direct futures commission merchant (FCM). CME Group’s decision follows digital currency exchange FTX, as the crypto company applied to become a derivatives clearing organization and is awaiting approval from the US Commodity Futures Trading Commission (CFTC). If CME Group is approved to be an FCM, the company can bypass third-party brokers and offer futures directly on the CME platform.
The world’s largest financial derivatives exchange, CME Group, has reportedly filed paperwork to become a futures commission merchant (FCM), according to a report published by the Wall Street Journal (WSJ). WSJ writer Alexander Osipovich explained that CME filed the filing in August, and Osipovich believes the company is “taking cues from [the] cryptorival FTX.”
If CME Group’s FCM registration is approved, CME will be able to offer derivatives directly without the need for brokerages such as TDAmeritrade, Saxo Bank Interactive Brokers, Robomarkets and Grandcapital. FTX is awaiting approval from the CFTC to become a derivatives clearing organization. In March of last year, the CFTC opened public comments so that they could gain insight into FTX’s proposal. In mid-May, the chairman and CEO of CME Group, Terry Duffy, wrote that the move from FTX could constitute a “market risk”.
“FTX’s proposal is obviously flawed and posturing [a] significant risk to market stability and market participants”, Duffy believed at the time. “FTX proposes to implement a ‘risk management light’ clearing regime that would significantly increase market risk by potentially removing up to $170 billion of loss-absorbing capital from the cleared derivatives market, eliminate standard credit checks and destroy risk management incentives by limiting capital requirements and mutual risk.”
The report written by Osipovich describes Advantage Futures chairman and CEO Joseph Guinan as saying the move could be very dramatic. “I wouldn’t expect CMEs to go down the path where they compete directly with FCMs for clients,” Guinan noted. “But if they went down this path, it would be a game-changer for the FCM industry and a dramatic concern for every FCM.”
As the CFTC weighs in on the FTX proposal, Osipovich quoted Craig Pirrong, a University of Houston finance professor as saying that CME’s FCM decision was a response to the FTX plan. “From a philosophical perspective, they would prefer not to do this,” Pirrong said on September 30. “However, in the event that the CFTC approves the FTX model, from a competitive perspective, they may feel they have to do this.”
Osipovich also published comments from a CME Group spokesperson commenting on CME’s FCM August filing. “Our commitment to the FCM model and the significant risk management benefits it provides to all industry participants remains unwavering,” the CME Group representative said. In terms of bitcoin (BTC) futures volume, FTX and CME Group have relatively the same amount of bitcoin futures open interest and BTC futures trading volume as well.
What do you think about CME Group going head-to-head with FTX in applying for a futures commission dealer status? Let us know what you think about this topic in the comments section below.
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