CME Group released the following statement regarding the Commodity Futures Trading Commission’s (CFTC) position on the exchange of futures for futures (EFFs):
“The only prearranged trades which are accepted by CBOT are those permitted by Rule 526 (Block Trades) and Rule 538 (Exchange for Related Positions). CBOT Rule 538, which has been in place in various forms for many years currently permits three types of ‘Exchange for Related Positions’ transactions that facilitate the completion of two discrete but related transactions. EFRPs are traditionally used to preserve basis relationships and mitigate execution risk associated with the initiation or liquidation of a futures or futures option position to hedge a physical or OTC transaction. If prearranged matching pairs of offsetting EFRPs or block transactions were executed without incurring market risk, CBOT’s prohibitions on wash sales and fictitious trading would be violated.
“We have been assured by the Commission that CBOT’s rules respecting block trading and improper trade practices remain in full force and effect and must be enforced. The Commission has not required CBOT to accept block trades that violate those rules or to accept block trades that otherwise violate CBOT trade practice rules. CBOT and CME Clearing have not been directed to accept directions from ELX or any of its members to transfer open positions through ELX’s EFF rule.
“We are confident that CBOT is operating in strict compliance with all of the Core Principles, including Core Principle 18 (Antitrust Considerations) which is directed at ensuring that designated contract markets act consistently with the antitrust laws. Antitrust laws do not require us to take action to enable new entrants to take advantage of our substantial investments in innovation and marketing through which we have developed deep liquidity, broad customer relationships and world-class central counterparty clearing systems.”