(Bloomberg) -- CME Group Inc. won approval to operate its own futures commission merchant, a move that received swift criticism from some market participants.
The Chicago-based exchange operator said it received approval from the National Futures Association to establish an FCM, according to a statement Tuesday. While CME says it remains “committed” to the FCM model, which is responsible for accepting orders to buy or sell futures contracts, options on futures and money to complete customer orders, there is potential for change.
“As our industry continues to evolve, our FCM will ensure CME Group is in a strong position to quickly adapt to our clients’ changing business needs,” Chief Executive Officer Terry Duffy said in the statement.
CME decided to submit the FCM application in 2022 in response to the vertically integrated model seen in the cryptocurrecy market. FTX had sought approval to clear crypto derivatives trades without intermediaries such as FCMs, then withdrew the application after the crypto exchange imploded.
In an interview with Bloomberg News last year, Duffy said that FTX’s proposal and others like it “could be another way to eliminate friction” in the market if there were rules written around it. CME’s decision to apply for its own FCM was defensive.
“It’s because I don’t know what the world’s going to look like and I don’t want to be left behind,” he said in October 2023.
Some large industry players have already voiced concerns over the approval of CME’s FCM application. It’s “the latest and most significant example of a trend that raises serious concerns about market regulation and systemic risk,” the Futures Industry Association said in a statement Tuesday.
“We strongly believe inherent conflicts of interest exist when one organization controls multiple market functions — trading, clearing, intermediation and market regulation,” Chief Executive Officer Walt Lukken said.
A representative for CME declined to comment beyond its statement.
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