Antitrust Division Clears Combination of Financial Futures Exchanges

This posting was written by Jeffrey May, editor of CCH Trade Regulation Reporter.

The Department of Justice Antitrust Division announced on June 11 that it closed its investigation into the proposed acquisition of CBOT Holdings Inc. by Chicago Mercantile Exchange Holdings Inc. (CME), after concluding that the transaction was not likely to reduce competition substantially.

The Antitrust Division cleared the transaction without conditions. An investigation into a 2003 agreement under which CME provides clearing services to CBOT was also closed. The Antitrust Division examined the impact that the deal would have on the U.S. futures markets.

According to the Antitrust Division's statement, although the two exchanges account for most financial futures (and in particular, interest rate futures) traded on exchanges in the United States:

 their products are not close substitutes and seldom compete head to head, but rather provide market participants with the means to mitigate different risks; and

 they are, absent the merger, unlikely to introduce new products that compete directly with the other’s entrenched products, in part due to the difficulty of overcoming an incumbent exchange’s liquidity advantage in an established futures contract.

“In connection with its investigation, the Division relied on the Commodities Futures Trading Commission (CFTC) as a resource concerning the nature and regulation of futures markets,” it was explained.

“The information the CFTC provided was invaluable in helping the Division understand current regulatory policy, and the Division looks forward to working with the CFTC on an on-going basis to ensure competition in futures markets.”

The June 11 statement appears on the website of the Department of Justice Antitrust Division.