BGC Group To Trade Futures On New Exchange: CEO Lutnick Is 'Jazzed, Jazzed, Jazzed'

BGC Group Inc., BGC a financial services firm led by Cantor Fitzgerald CEO Howard Lutnick, plans to launch an exchange that will start trading secured overnight financing rate (SOFR) futures on Sept. 23 on its new FMX Futures Exchange.

The SOFR is a benchmark interest rate for dollar-denominated derivatives and loans that replaced the London Interbank Offered Rate (LIBOR) in June 2023.

“I think we’re going to bring competition into the market and I’m jazzed, jazzed, jazzed,” Lutnick said in announcing the new exchange on Bloomberg Television on Wednesday.

FMX Futures Exchange is a consortium backed by Bank of America Corp. BAC, Barclays BCS, Citadel Securities, Citigroup Inc. C, The Goldman Sachs Group Inc. GS, J.P.Morgan Chase & Co. JPM, Morgan Stanley MS, Jump Trading Group and Tower Research.

On April 25, these financial services companies together bought a 26% stake in FMX for $172 million, which valued the exchange at $667 million. BGC gave the partners an additional 10% stake contingent upon them hitting certain volume targets, Piper Sandler analyst Patrick Moley wrote in a note on Thursday.

Moley noted that FMX’s intent is to take some of the Chicago Mercantile Exchange’s (CME) total monopoly SOFR futures, which make up 30% to 40% of CME’s interest rate derivative volumes.

Read Also: Will Trump Body-Slam 2024 Election? New Transition Team Co-Chair Led WWE For Decades

“We’re going to create a break in the monopoly built by the Chicago Mercantile Exchange,” Lutnick said Wednesday. “It’s so fun and it’s so exciting.”

FMX plans to start trading U.S. Treasury futures in next year’s first quarter.

FMX is not expected to take "meaningful" market share from CME in interest rate futures until the third year after its launch, Moley said.

“However, CEO Lutnick believes FMX will have record open interest for a new exchange at the end of year 1,” he wrote.

Moley said that CME CEO Terry Duffy believes that U.S. regulations will not allow FMX to succeed, given that trades will be cleared by LCH Group, a London-based clearing house.

But Lutnick disagrees with Duffy, Moley said. As a Commodity Futures Trading Commission-recognized organization, it will be clearing trades through a U.S. subsidiary on U.S. soil.

“Bottom line, FMX has all the regulatory approvals / registrations needed to launch on September 23rd,” Moley wrote.

“And while CEO Duffy believes the U.S. government / regulators will eventually intervene and possibly block FMX's use of clearing partner LCH (which we believe would ultimately lead to FMX failing to succeed in IR futures), there is no evidence to suggest this will occur at this point in time.”

BCG Price Action: BCG Group ticked up 0.11% to $9.26 into Thursday’s early afternoon trading.

Read Now:

• Cantor Fitzgerald Discontinues Research Coverage Of The Cannabis Sector