Goldman Sachs and Citadel Securities Support Howard Lutnick's FMX Futures Exchange

Howard Lutnick, the chairman of Cantor Fitzgerald, has secured support from major investment banks and proprietary traders for his new futures market venture, FMX. Citadel Securities, Goldman Sachs, and eight other prominent global investment firms are investing a total of $172 million for a 26% stake in FMX, valuing the venture at $667 million.

FMX, which combines BGC's U.S. cash treasuries platform, spot foreign exchange platform, and U.S. interest rate futures exchange, has received CFTC approval and is expected to launch in September 2024. The platform already trades currencies and cash Treasuries, capturing a 28% market share in the exchange-traded Treasury market at the expense of CME's BrokerTec.

Why this matters: FMX's launch marks Lutnick's third attempt to challenge the CME Group's long-standing dominance in the US Treasury futures and interest rate derivatives market. The backing of major financial institutions highlights the industry's interest in diversifying the marketplace and potentially reducing costs associated with trading Treasury futures.

According to Lutnick, the partnership with these strategic investors is expected to help FMX become a rapidly growing futures platform, creating important efficiencies for shared clients. FMX's unique protocols are expected to provide a competitive edge across rates, FX, and futures markets, enhancing market liquidity and lowering costs for all participants.

Other investors in FMX include Bank of America, Barclays, Citi, JP Morgan, Jump Trading Group, Morgan Stanley, Tower Research Capital, and Wells Fargo. The investment is seen as a vote of confidence in Lutnick's latest effort to disrupt the futures market and a catalyst for increased competition in the U.S. derivatives markets.

CME's CEO, Terry Duffy, has acknowledged the competitive threat posed by FMX but remains confident in CME's ability to maintain its market position. "We feel we are in a very good position, but we never discount competition," Duffy said, noting that CME will benefit from capital efficiencies.

The launch of FMX comes amid high volatility in bond markets as investors debate the timing of the Federal Reserve's shift to lower interest rates. Upcoming regulatory changes, such as mandatory clearing rules, could also reshape the market and benefit both CME and FMX by increasing trading volume in their cleared marketplaces.

Key Takeaways

• Cantor Fitzgerald's FMX futures market venture secures $172M from 10 major firms.
• FMX combines BGC's US cash treasuries, FX, and interest rate futures platforms.
• FMX aims to challenge CME Group's dominance in US Treasury futures and derivatives.
• Major banks see FMX as a way to diversify the marketplace and reduce trading costs.
• CME acknowledges FMX as a competitive threat but remains confident in its position.