FT editor Roula Khalaf presents her favorite stories in the weekly newsletter, where bond pioneer Howard Lutnick is gearing up for his third attempt to break CME’s stronghold on Treasury futures trading. Lutnick believes that CME’s dominance in this market is one of the great monopolies in America and plans to challenge it with a new rival marketplace controlled by Cantor Fitzgerald chair BGC Partners. Despite the formidable adversary in CME Group, with its $67 billion valuation as the world’s largest exchanges group, Lutnick is determined to launch the FMX platform in the third quarter with LCH as a partner.
Trading in Treasury futures has reached about $550 billion per day, with volumes surpassing those in actual Treasury bonds last year. While CME’s dominance in this market is significant, Lutnick is confident in his ability to break through this monopoly with the right partnerships and strategy. He has learned from past mistakes, including a failed joint venture with Citadel Securities in 2007, and is now prepared with LCH on board to support his new venture.
Longtime CME chair Terry Duffy remains relaxed about the competition from FMX, stating that as long as everyone follows the same set of rules, he is fine with competition. Lutnick highlights BGC’s success in building a new platform for Treasury bond trading since 2018, where they have already taken market share from CME’s BrokerTec business. Analysts believe that Lutnick has the components for success, but breaking through the CME fortress has proven to be a challenging task for previous contenders.
Chicago has fought hard to maintain its dominance in the futures market, with previous challengers including BrokerTec, Eurex, NYSE, and Lutnick himself. Despite the challenges and competition, Lutnick remains determined to challenge CME’s monopoly and provide traders with an alternative marketplace for Treasury futures trading. With the launch of FMX in the third quarter, the battle for market share is set to intensify as Lutnick aims to disrupt the status quo in the trading industry.
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