NYSE Euronext (NYX) has for the last two years tried unsuccessfully to challenge CME Group (CME) in the commodities business. CME has largely been viewed as an impregnable fortress with an iron grip of U.S. commodities trading, and all the firms that engage in commodities trading — much in the same way NYSE dominates its slice of stock trading.
But if today’s deal with IntercontinentalExchange (ICE) is approved, it will be a game changer and pose a great threat to CME, and even competing equity and derivative exchanges for reasons little understood outside Wall Street’s inner sanctums.
ICE, which has essentially built a global commodities business in the span of a decade, should be expected to use its significant expertise in the commodities market to attract CME’s customers, and those of many other exchanges.
One possible approach would be if the NYSE and ICE get approval from the Securities and Exchange Commission or Commodity Futures Trading Commission to offer preferential, volume-based pricing to customers. The plan has been under study for years at SEC, but CFTC, which is considered more pro-business than SEC, could approve a new universal fee schedule. If this happens, investors would pay lower exchange fees — transactions and perhaps even technology fees that are the real cost of business — and that could make life very difficult for CME and give a big boost to a merged ICE and NYSE.
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