BGC chief confirms US treasury futures launch in September

The chairman and chief executive of BGC Group has confirmed the US broker will launch in September its much-anticipated US treasury futures trading platform in a direct challenge to CME’s dominance of the world’s biggest rates market.

Speaking as BGC Group announced second quarter earnings up 11.7% to $550.8m (£430m), Howard Lutnick confirmed the firm's new US treasury futures trading venue called FMX will go live in September.

Lutnick said: “FMX, together with its clearing partner, LCH, has full CFTC approval to open our futures exchange. Together with our 10 partners, the world's largest banks and market-makers, we look forward to the launch of SOFR futures, the largest notional futures contract in the world, in September."

FMX plans to launch in September with Secured Overnight Funding Rate (SOFR) futures before making available other US treasury futures in a second launch date which has yet to be confirmed.

BGC plans to offer clients savings by clearing its US treasury futures through LCH, opening margin efficiencies to firms that already clear their US interest rate swaps with LCH, the world’s largest swaps clearing house.

Lutnick said FMX, which already trades US government bonds, was a key driver behind the group’s record second quarter revenue and Adjusted Earnings which he attributed to “continued growth across our businesses and geographies”.

The BGC chair and chief exec said on Tuesday: “Our revenue growth of 12% delivered Adjusted Earnings growth of over 19%, demonstrating BGC's operating leverage. Higher revenues, along with improved profitability in our FMX and Fenics businesses, contributed significantly to our profit growth and margin expansion in the second quarter.”

Lutnick said FMX’s US government bond trading volume was up 37% in the three months to the end of June, offering a strong tailwind to the launch of FMX’s US treasury futures.

Speaking on a CME earnings call on Wednesday last week, CME chief Terry Duffy was asked repeatedly by analysts about the threat of competition from BGC.

The CME boss said: “In addition to our impressive quarterly volume results, we continue to provide unmatched and I’ll say it again unmatched capital efficiencies for our customers. Within interest rates alone, these efficiencies resulted in margin savings of nearly $20bn (£15.5bn) per day for our clients through the unique combination of offsets within our rates futures and options franchise.”

BGC said in April Bank of America, Barclays, Citadel Securities, Citi, Goldman Sachs, JP Morgan, Jump Trading Group, Morgan Stanley, Tower Research Capital and Wells Fargo have taken minority equity stakes in the venture, giving FMX an equity valuation of $667 million.