Billionaire CEO plans to launch a new exchange to trade interest-rate futures

• Billionaire CEO Howard Lutnick is planning to launch a platform for interest-rate futures trading, WSJ reported.
• The platform, called FMX Futures Exchange, would rival contracts listed on the world's leading deviates exchange, the CME Group.
• "For the first time, the most valuable futures market in the world will have real competition."

Billionaire Howard Lutnick, CEO of Cantor Fitzgerald, is launching a new exchange to trade futures linked to US interest rates, The Wall Street Journal reported.

FMX Futures Exchange, which plans to go up in mid-2024, will list futures linked to US bond yields and the Secured Overnight Financing Rate (SOFR). 

Most interest-rate futures today — about 99% of the trading volume — are traded on the Chicago Mercantile Exchange, WSJ said, citing FIA data. The exchange is now the world's most valuable exchange operator, boasting a $73 billion market cap.

That means Lutnick's venture would be up against the world's leading derivatives marketplace. FMX's contracts would have to compete with the trillions of dollars worth of interest-rate futures traded on the CME every day. 

But Lutnick believes the new exchange will have an edge over CME, offering perks like a lower cost of trading.

Interest rate futures work like any other futures contract, allowing traders to bet on the direction of rates for everything from the US 10-year Treasury to lending benchmarks like SOFR to the federal funds rate. 

There have been efforts to rival the CME with a market for interest-rate futures before — like NYSE Euronext and ELX Futures — but the Chicago-based exchange is still on top. One effort was led by Lutnick himself back in 2013, when he launched Fenics UST, a trading platform for government bonds.

The Commodity Futures Trading Commission approved FMX's application to launch a new trading platform on Monday.

"With this CFTC approval, we will combine our leading Fenics UST cash Treasury platform with our FMX Futures Exchange to deliver competition across the CME's U.S. interest rate complex," Lutnick said in a release. "For the first time, the most valuable futures market in the world will have real competition."