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ELX Futures, L.P. (ELX Futures), a fully electronic futures exchange, released the following statement today regarding the Commodity Futures Trading Commission (CFTC) letters on the topic of EFFs.
The CFTC posted on its website two letters regarding EFFs. In the first letter(http://cftc.gov/ucm/groups/public/@newsroom/documents/file/cftc_cmeletter081310.pdf), the Commission states that EFFs do not violate any laws or regulations, upholding ELX’s and the CFTC staff's view and contradicting many months of assertions by the CME Group that EFFs are illegal transactions. Separately, the Commission directed the staff to analyze whether the real reason for CME’s anti-EFF position is anticompetitive concerns that violate CFTC’s Core Principle 18 related to antitrust requirements. The CFTC staff has issued a letter dated August 13, 2010 to the CME Group as part of this antitrust review, and asked for "empirical" evidence in response to 12 questions to be furnished within 30 days of the letter: (http://cftc.gov/ucm/groups/public/@newsroom/documents/file/dmo_cmeletter081310.pdf).
In essence, the Commission has said that an exchange’s decision not to accept trades that involve other markets cannot be based on impermissible competitive interests in violation of Core Principle 18 (Antitrust Considerations) – the decision must be based on market and customer interests. As a result of its conduct, the CME Group now finds itself under a federal (CFTC) antitrust review.
Neal Wolkoff, Chief Executive Officer of ELX Futures, said, “We cannot think of any reason why the EFF transaction does not benefit customer and market interests, and believe that the CME Group is acting solely for its own competitive interests in opposing the EFF. ELX intends to vigorously pursue full acceptance of the EFF and will assist the Commission and its staff in any way to complete its antitrust analysis of the rationale behind the treatment of EFFs.”
