Despite record results, one topic dominated CME’s Q2 earnings call earlier this week: FMX.
CEO Terry Duffy has been vocal from the outset about his thoughts on the rival derivatives exchange, set to be launched by interdealer broker and services provider BGC Group this September, adamant that it will not prove a threat to CME’s near monopoly on interest rate futures.
Throughout the call, he repeated that CME’s capital efficiencies are “unmatched […] within interest rates alone”, and reassured that “we are in a strong position today to compete with anybody”.
The feud between Duffy and BCG Group CEO and chair Howard Lutnick is playing out in real-time on the global stage. In a recent interview with CNBC Duffy began by fueling the fire; “I did hear that [Lutnick] was on your show, and he said that when you have me on I might say nasty things if you mention his name, which would be stupid of me to do because i don’t need to say something that everybody else has already said for a number of years.”
In the Q2 results call, Duffy focused on the business angle rather than the personal. Much of the topic has to be discussed in hypotheticals. FMX has not yet launched, receiving CFTC approval at the start of this year, and Lutnick shared in the firm’s Q1 results call that he does not expect to start “making a dent” in futures markets before 2026.
When asked what the competition is offering, “they’re going to compete with lesser efficiencies that are exactly zero. They don’t have any futures business, so they can’t have any efficiencies,” Duffy summarised. The CEO’s most acute issue with FMX is its intention to list US sovereign debt in the US and route clearing through the London Clearing House (LCH), part of the London Stock Exchange Group (LSEG). In doing so, Duffy says, US regulators will lose oversight and the country will be put at risk.
Duffy therefore does not expect US regulators to get on board with FMX’s plans; “I don’t want to put the cart in front of the horse, but I think there’s a long way to go before [it’s] even been decided what you can and cannot do,” he stated on the results call. “That’s why the efficiencies are zero and they’ll stay zero.”
In the CNBC interview Duffy doubled down on his criticism of FMX, adding that he has been working to prevent the exchange from getting off the ground. “I’ve been at the Treasury, I’ve been on the Hill, I’ve been reminding people of how important this product [sovereign debt] is. I’m not going to sit idly by while he talks about these numbers, and how his percentages are growing, and that we’re this great monopoly that he’s going to come after and disrupt. It’s false,” he declared.
Duffy’s confidence did little to stop those on the exchange’s Q2 earnings call from posing several questions about potential competition – and with just two months until FMX Futures’ planned launch in September, those questions are sure to keep coming.
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