Joint Letter - Regulators Should Review Harms of CME Group Inc.’s Potential Merger with Cboe and Conduct Study on Existing Concentration Problems

Reported merger threatens to further consolidate CME Group Inc.’s near-monopoly and increase lack of competition in derivatives markets

Better Markets and the Open Markets Institute sent a joint letter to antitrust and financial regulators raising serious concerns about a potential merger between the CME Group Inc.’s (CME) and Cboe Global Markets (Cboe)—and requesting a deeper investigation into the merger, and the CME’s already near-monopoly in derivatives markets.

By some measures, the CME already facilitates 92 percent of U.S. exchange-traded derivatives volumes.

The letter also asks that the Justice Department, Federal Trade Commission, Securities and Exchange Commission, and Commodity Futures Trading Commission undertake a broader public industry study of the existing concentration problems of derivatives exchanges at large, and the impacts of fifteen years of consolidation.

In response to the letter release, Stephen Hall, Legal Director at Better Markets stated that, “[t]he CME’s acquisition spree in the last 15 years has reduced competition in the U.S. derivatives markets to the point that one exchange group now has a monopoly or near-monopoly on numerous critical futures contracts and derivatives markets.  Because of this stranglehold, a hidden tax is routinely extracted from America’s working families, increasing the price of everything from a tank of gas to a loaf of bread.”

Alexis Goldstein, Open Markets’ Director of Financial Policy, said, “A merger between the CME and one of its few remaining competitors will only further concentrate risk in ways that increase volatility and the likelihood of disruptions. Such concentration may also make it easier for large corporations and speculators to manipulate the prices for the goods, services, and commodities traded on these markets, in ways that harm our communities and families. Further, such concentration harms independent investors by reducing choice, raising prices, and cutting transparency.”

“If anything,” Goldstein added, “regulators and Congress should be looking to reduce the CME’s existing concentration of power of markets by reversing some of the dangerous mergers of recent years.”

The CME has denied that a merger is planned. Yet, the Financial Times’ reporting on the CME-Cboe merger transaction was remarkably specific.

“If the reports are accurate,” Mr. Hall emphasized, “an investigation of the transaction and its potential adverse competitive effects would be a public-interest imperative.”

Download the full letter here or see below.