According to a recent report, the world’s largest derivatives exchange CME Group is looking to register as a direct futures commission merchant (FCM). CME Group’s decision follows the digital currency exchange FTX, as the crypto company applied to become a derivative clearing organization and awaits approval from the U.S. 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.
Derivatives Exchange CME Group Registers for FCM While FTX Awaits CFTC Approval
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 author Alexander Osipovich explained CME filed the registration in August and Osipovich opines that the company is “taking cue from [the] crypto rival FTX.”
If CME Group’s FCM registration is approved, CME will be able to offer derivatives directly without the need for brokerage houses like TDAmeritrade, Saxo Bank Interactive Brokers, Robomarkets, and Grandcapital. FTX is awaiting approval from the CFTC to become a derivatives clearing organization. Last March, the CFTC opened public comments so it could get insight into FTX’s proposal. In mid-May, CME Group chair and chief executive officer Terry Duffy wrote that the move by FTX could present “market risk.”
“FTX’s proposal is glaringly deficient and poses [a] significant risk to market stability and market participants,” Duffy opined at the time. “FTX proposes to implement a ‘risk management light’ clearing regime that would significantly increase market risks by potentially removing up to $170 billion of loss-absorbing capital from the cleared derivatives market, eliminating standard credit checks, and destroying risk management incentives by limiting capital requirements and mutualized risk.”
The report written by Osipovich details that the chairman and chief executive of Advantage Futures, Joseph Guinan, says the move could be very dramatic. “I would not expect the CME to go down the path where they compete directly with FCMs for clients,” Guinan remarked. “However, if they did go down this path, that would be a game-changer for the FCM industry and a dramatic concern for every FCM.”
While the CFTC weighs in on the FTX proposal, Osipovich cited Craig Pirrong, a finance…
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