Episode summary
CME CEO Terry Duffy: We're seeing a record-level of participation
CNBC Power Lunch
· · 5 min · Hosts: Brian Kelly, Kelly Evans · Guests: Terry Duffy
Summary
CME Group’s third quarter set records for revenue and trading volume, and Terry Duffy said the result reflects intense demand for hedging and risk management. He pointed to geopolitical shocks, oil and diesel price swings, and inflationary pressure as reasons clients are increasingly active, saying CME is seeing a record level of participation from institutional and commercial users. He said the exchange now has 133 plus million contracts open and is generating $100 billion a day of efficiencies for participants.
Duffy also argued that financial innovation is essential, but only when it stays within a strong regulatory framework. He warned that the market is seeing too many self-certifications and too little scrutiny from the CFTC, which he said creates credibility and manipulation risks. In his view, products that promise fast growth without clear oversight can hurt the broader financial system.
On perpetual futures and other new products, Duffy said the key issue is not just the lack of an expiration date but the leverage and funding mechanics. He compared some of these products to swaps and said some overseas markets are offering extreme leverage, which he believes U.S. participants do not want.
Key takeaways
- Terry Duffy said CME is seeing a record level of participation because clients are managing geopolitical and inflation-driven risk.
- CME reported 133 plus million contracts open and, according to Duffy, is creating $100 billion a day of efficiencies for participants.
- Duffy argued that innovation without regulation is a problem, citing more than 4000 self-certifications to the CFTC.
- He said some new products and high leverage levels could be disruptive to the financial system and should concern U.S. participants.
- Duffy described perpetual futures as swap-like because of their funding rates, not just because they avoid expiration and delivery.
Notable quotes
“INNOVATION IS CRITICALLY IMPORTANT. IT'S THE LIFEBLOOD TO ANY INSTITUTION”
“WE'RE SEEING OVER 4000 SELF CERTIFICATIONS GOING INTO THE CFTC WITHOUT ANY OF THOSE CONTRACTS BEING STAYED OR UPHELD”
“I DON'T BELIEVE THAT THAT IS SOMETHING THAT THE U.S. PARTICIPANTS WANT TO HAVE”
“WHEN YOU HAVE A FUNDING RATE ON A PERPETUAL, WHAT IT MEANS IS WE PAY EACH OTHER”
How the episode opens
All right. Welcome back. Business is booming at CME Group. It posted record third quarter revenue. It topped estimates across the board trading volume also hitting a third quarter record. Joining us now from the CME is the chair and ceo Terry Duffy. Terry it's great to have you on. A lot to talk about. What is the state of trading in america globally and at the CME right now. How much interest are we seeing from your clients.
Well brian we're seeing a tremendous amount of interest. You know you just turn on any network and you can see what's going on around the world. There's so much uncertainty whether it's geopolitical or otherwise.
I mean, prices are all over the map due to the iranian situation. And then you got the ukraine and russia situation. And so you got the spikes with diesel and other oil products.
And then obviously the inflationary pressures are in there. People need to manage that risk. I mean, it's just too big of a risk not to allow yourself to participate in the marketplace today.
So we're seeing record level of participation coming from our institutional commercial participants each and every day, which is reflective, brian, in our open interest of our positions of 133 plus million contracts open on CME holding hundreds of billions of dollars of customer capital, and we're creating $100 billion a day of efficiencies for those participants. So it's really important that people manage their risk right now, brian, as you know.
And terry, it's kelly just to jump in here. You know, there's so much innovation with financial products right now. Do you guys need more scale? I mean, when I look at CME and seaboard and then here come perps and here come, you know like you name it right.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- record trading volume
- risk management
- market uncertainty
- innovation in trading products
- open interest
Companies and tickers mentioned
- CME
- CME Group
Watch the episode
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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