The former chairman of the Commodity Futures Trading Commission, Philip McBride Johnson, opined that ELX’s rule on exchange of futures for futures, which the CFTC approved in October 2009, was like the following property trespass:

“RESOLVED, that effective immediately, the Johnson family shall have full and unfettered access to their neighbour’s swimming pool.”

While it sounds folksy, it fails as a good metaphor on several levels.

Does the Johnson family’s neighbor own the water company? Does that family keep access to the water strictly available for its own pool? Do we care if the neighbors bought the water company many years ago when the population was small and few children lived in the town who wanted to swim?

It’s with a sense of relief that Mr Johnson won’t opine that the family invented pool water, and so have an unwritten common law intellectual property right to swim and swim alone.

Mr Johnson is a good lawyer, but in fact, his firm – where he heads the exchange-traded derivatives regulatory practice – hails the CME as one of its most prominent clients. Mr Johnson's metaphors spring (no watery pun intended) from an attorney-client relationship, and are meant to advocate a view, not objectively analyse the issue.

I too am an advocate. As the CEO of ELX, I seek to grow a futures exchange that competes with one that owned 100% of the market share in US interest rate futures contracts before we started. It owned the water company.

Was it a good idea for the government to allow one exchange to own the marketplace and have others enter on its terms (Swim only at night. On hot days, pool access is $500/hour.)?

I don’t think that was a good idea, even if the markets used to be simpler, and there were fewer interested participants.

Intellectual property is a strange concept for an exchange to rely on, 40 years after it overlaid the bond market with a futures contract. There is no patent, copyright or trademark on the contracts, and the notion that we are trespassers – a firm that takes someone else’s float from the pool – is charming but baseless.

ELX was not the first firm to use the EFF concept. Nymex used it to compete against Brent futures in New York and again when it opened a Dublin floor. CME stands by passively and allows the same sort of transactions to occur in its oil and gas contracts, so they are interchangeable with the Intercontinental Exchange’s contracts.

ELX also sought and received approval for the EFF rule from the federal regulatory agency that decides on these things. CME’s objections have been dismissed as “meritless” by senior staff at the CFTC.

Mr Johnson, the market became heated at the non-competitive market structure among futures exchanges, and demanded to cool off. ELX is here to compete. We are the second pool.