Where was the Chicago Mercantile Exchange at the FIA Expo?
Contributed by Susie Potier
A rumor was circulating around the Futures Industry Association (FIA) Expo last month when the largest futures exchange did not exhibit at the conference. The question on the tip of everyone’s tongue was “why wasn’t the Chicago Mercantile Exchange (CME) at the FIA show?” It was the talk of the convention as futures traders from all over the country gathered in Chicago to discuss the changing futures trading landscape. As the CME is one of the original members of the Futures Industry Association, it is worrisome they did not sponsor this year’s event.
The FIA was established in 1955 as the national trade organization for the futures industry. According to their website, their mission is to provide a forum to discuss issues within the futures industry, work with the exchanges and represent the public customer. They also study ways to reduce transaction costs, eliminate credit fraud as well as coordinate educational and networking seminars, including those held at the FIA Expo, FIA Boca in May and the International Derivatives Expo in June.
Their members include over 40 of the largest futures commission merchants. The FIA also estimates that their members are responsible for 80 percent of customer business transactions executed on U.S. futures exchanges.
John Lothian, a futures broker who writes a daily newsletter, pointed out the absence of the CME at the FIA Expo on November 16, 2007. In his newsletter, he questioned the Exchange’s motives for not exhibiting at the show and said that “the spiteful posture sends a chilling message to the rest of the futures industry about how the CME group may be willing to treat those who have disagreed with them in the past or may disagree with them in the future.”
After reading Mr. Lothian’s comments and watching the FIA keep the CME’s booth space at the expo, it can only make one wonder if there is more to this story…
And so there is. The Futures Industry Association’s website states that the FIA wrote a letter to the Commodity Futures Trading Commission regarding a petition filed by the Chicago Mercantile Exchange. The petition requested that an arm of China’s central bank, called the China Foreign Exchange and Interbank Trading System, have access to become “super clearing members” of the Chicago Mercantile Exchange. They asked the Commodity Futures Trading Commission to allow the bank in China to clear foreign exchange and interest rate futures contracts without having to register as futures commission merchants.
The Futures Industry Association, in the letter to the Commodity Futures Trading Commission, said that this request by the Chicago Mercantile Exchange would undermine “fair competition” in the marketplace. The FIA also took the position that this move would “adversely affect the ability of the Commission and the CME to discharge their responsibilities.”
Is the CME upset with the FIA for writing a comment against their request?
The thing is that this is not the first time that the Futures Industry Association has disagreed with the Chicago Mercantile Exchange. The FIA and the CME did not see eye to eye when the Chicago Mercantile Exchanges merged with the Chicago Board of Trade.
The Futures Industry Association spoke out against the merger on their website. They argued that the Chicago Mercantile Exchange and the Chicago Board of Trade were already two of the largest futures exchanges in the US. As individual exchanges, they represented over 85 percent of the US futures market. The FIA explained that the merger would “concentrate significant market power in the new CME Group.” The FIA also said that the combination would “substantially lessen competition among US futures exchanges, and raise even higher the barriers to entry for new competitors.”
By not attending the FIA Expo, was the Chicago Mercantile Exchange flexing their muscles and pulling rank on the FIA for disagreeing with them over the merger issue?
CME employees offered different reasons for their absence. One source said that the CME was absent because they “had too much going on in Asia” and didn’t have time to fit the FIA into their schedule. Another source said that their marketing departments were still in a transition phase after the merger and couldn’t pull it together in time to advertise at the show.
For whatever reason, the Chicago Mercantile Exchange did not participate in the Expo this year and they were greatly missed. Everyone was talking about why they weren’t there. It could be that the CME had too many initiatives playing out in Asia or that their two departments weren’t ready to officially advertise as one. Or, with all the speculation their absence has lead to, this could just be one of the greatest marketing schemes ever played out.
