Goldman Sachs and Citadel Securities, alongside eight other major trading groups, are endorsing bond pioneer Howard Lutnick’s latest endeavor to challenge CME‘s monopoly on the US Treasury futures market.
The collective investment from these institutions amounts to $172 million, securing a 26% stake in Lutnick’s venture, FMX, and valuing it at $667 million.
Scheduled for launch in September, FMX’s futures trading initiative marks Lutnick’s third attempt to disrupt CME Group’s stronghold over the extensive Treasury futures market.
Lutnick, renowned for spearheading electronic government bond trading in the late 1990s, has criticized CME’s dominance as “one of the great monopolies in America,” with daily trades exceeding $645 billion last year.
The surge in futures trading, fueled by increased US government borrowing, has seen leveraged investors capitalize on minute discrepancies between futures and underlying bond prices.
In addition to Goldman Sachs and Citadel Securities, Bank of America, Barclays, Citigroup, Jump Trading, JPMorgan Chase, Morgan Stanley, Tower Research Capital, and Wells Fargo are also investing in FMX.
Lutnick emphasized the value these investors bring to FMX, benefiting all market participants. FMX, under the brokerage BGC Group, where Lutnick serves as chair and chief executive, already conducts currency and cash Treasury trades, with regulatory approval granted for futures trading in January.
FMX has gained significant traction in the exchange-traded Treasury market, capturing a 28% market share, largely at the expense of CME’s BrokerTec.
Citadel Securities previously supported Lutnick’s attempts to challenge CME in 2007, while earlier efforts in 1998, in partnership with the New York Board of Trade, were unsuccessful.
FMX’s futures trades will be cleared by LCH, controlled by the London Stock Exchange Group.
CME’s CEO, Terry Duffy, acknowledged the competitive landscape but affirmed the exchange’s readiness to compete, citing his two-decade tenure and continuous exposure to competition.
