Goldman Sachs and Citadel Securities are part of a group of 10 large trading groups supporting Howard Lutnick’s efforts to break CME’s monopoly on the US Treasury futures market. The investment banks and proprietary traders are investing $172 million for a 26% stake in Lutnick’s venture, FMX, giving it a valuation of $667 million. Lutnick’s previous attempts to challenge CME’s dominance have failed, but he is set to launch futures trading on FMX in September, aiming to disrupt the $645 billion daily market.
Futures trading has seen significant growth in recent years due to increased US government borrowing, leading to leveraged investors trading the “basis” to profit from price gaps between futures and underlying bonds. Bank of America, Barclays, Citigroup, Jump Trading, JPMorgan Chase, Morgan Stanley, Tower Research Capital, and Wells Fargo are also backing FMX. Lutnick believes that the expertise and value these investors bring will benefit all participants in the market. FMX operates under BGC Group, where Lutnick serves as chair and chief executive, receiving regulatory approval to trade futures in January after establishing a market share in exchange traded Treasuries.
FMX’s previous attempts to challenge CME in 2007 and 1998 failed, but with the backing of a strong investor group, Lutnick is optimistic about the upcoming launch. The futures trades on FMX will be cleared by LCH, a clearing house owned by the London Stock Exchange Group, further challenging CME’s dominance. CME’s CEO, Terry Duffy, remains confident in the exchange’s ability to compete, citing past experiences with competition and emphasizing the importance of taking all competitors seriously. The battle for control over the vast Treasury futures market is set to intensify with the entry of FMX and its high-profile investors, adding a new dynamic to the established market dynamics.
In her Editor’s Digest newsletter, Roula Khalaf, Editor of the FT, highlights the significant developments in the financial market, including the backing of Howard Lutnick’s FMX venture by major trading groups like Goldman Sachs and Citadel Securities. Lutnick’s renewed attempt to challenge CME’s monopoly on the US Treasury futures market has attracted a total investment of $172 million, positioning FMX as a key player in the $645 billion daily trading market. With expertise from investment banks and proprietary traders like Bank of America and JPMorgan Chase, FMX aims to disrupt the market dynamics and provide value to all participants through its innovative approach to futures trading.
The upcoming launch of futures trading on FMX in September marks a third attempt by Lutnick to break CME’s stranglehold on the Treasury futures market. Despite previous failures, Lutnick remains determined to challenge CME’s dominance, emphasizing the value that a diverse investor group brings to FMX. With regulatory approval to trade futures and a significant market share in exchange traded Treasuries, FMX is poised to introduce a new dynamic to the market, potentially shifting the balance of power away from CME. The involvement of major players like Citadel Securities and Tower Research Capital further strengthens FMX’s position, creating a competitive landscape that CME’s CEO Terry Duffy acknowledges and respects.
In the face of growing competition, CME CEO Terry Duffy remains confident in the exchange’s ability to compete effectively. With over two decades of experience in navigating competitive challenges, Duffy is no stranger to market disruptions and recognizes the importance of taking all competitors seriously. While acknowledging the threat posed by FMX and its high-profile investors, Duffy remains committed to maintaining CME’s position in the market, emphasizing the resilience and adaptability of the exchange. As the battle for control over the Treasury futures market intensifies, market participants can expect increased competition and innovation, driven by the entry of new players like FMX and the established presence of CME.
The support from major trading groups like Goldman Sachs and Citadel Securities reinforces the potential impact of Howard Lutnick’s FMX venture on the US Treasury futures market. With a significant investment and backing from prominent investors, FMX is set to challenge CME’s monopoly on the market and introduce a new competitive dynamic. As Lutnick’s third attempt to disrupt CME’s dominance approaches, the financial market anticipates the launch of futures trading on FMX in September, with expectations of reshaping market dynamics and providing value to all participants. With regulatory approval secured and strong investor support, FMX is poised to carve out a substantial market share, posing a formidable challenge to CME and signaling a new era of competition in the Treasury futures market.
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