Here's the rub. Here's where and what I come back to, and it's safety. It is a "leverage" business. The FCM's add a layer of protection to the marketplace. An FCM stumbles and lets a big position holder hide, delay or default on it's position, it is the FCM that is in trouble and will suffer the financial consequences, not the exchange firstly and directly. Once again, it is a leverage business. It is a shoot first and ask questions later business. We have all seen it all too often. The common response is it can't happen anymore. Oversight is too good. If the FCM didn't see it then surely the exchange would and if not the exchange then without a doubt the CFTC would. All that be as it may. Many of us have seen a market move dramatically on rumor or the sniff of a rumor. If a rumor or the hint of one of a large customer of the CMEDIRECT were to make it's way into the market where is the safe haven? Where is the reputation of the exchange for future business and/or difficulties? Well the CME is too big to fail. They have a direct window to the Fed, no worries. That isn't any market I'm familiar with. Where do producers and users go then for price discovery or to hedge, or one of the myriad other strategies at work in the market today?
I don't know Jeff, I really don't. I'm just an average guy. The only thing that makes me different is I know I'm average.
As for "crypto", I have a tenuous grasp of the concept, but I surely know nothing about the "plumbing" of the various "crypto" attempts and how that would work across exchanges/FCM's. I guess I would say this is where being average catches up to me and I will wait for better minds to sort it out.
The one crypto exchange I have a modicum of knowledge about is Bitnomial. I get no information, because I am a minority investor, but they are CFTC regulated which ought to give customers and markets comfort.
I see both sides of the issue but I think it comes down to free market Enterprise and let the chips fall where they may and go ahead and give it a shot and see what happens.
Look, if we survived Bidenomics, we can survive this 😂
I think one idea is mistaken… “ it is the FCM that is in trouble and will suffer the financial consequences, not the exchange”. In actual practice other customers of the FCM have credit risk to the failing FCM, if the failing FCM has lost in excess of its posted margin and guarantee fund contribution, then the other contributors to the guarantee fund also suffer losses. Unfortunately, the history of fraudulent FCMs and brokers suggests that given a choice, I’d rather have my assets at the clearing house directly than with a broker (this is even before any consideration of account portability, and the horror stories of customers trying to move their positions and collateral out of a failing FCM only to have the phones go unanswered.) I don’t have a dog in this fight (exchanges owning FCMs) but there are countries (Brazil and Taiwan come to mind) where final beneficial customers’ assets are held at the clearinghouse directly with no adverse consequences that I’m aware of. Cheers.
Here's the rub. Here's where and what I come back to, and it's safety. It is a "leverage" business. The FCM's add a layer of protection to the marketplace. An FCM stumbles and lets a big position holder hide, delay or default on it's position, it is the FCM that is in trouble and will suffer the financial consequences, not the exchange firstly and directly. Once again, it is a leverage business. It is a shoot first and ask questions later business. We have all seen it all too often. The common response is it can't happen anymore. Oversight is too good. If the FCM didn't see it then surely the exchange would and if not the exchange then without a doubt the CFTC would. All that be as it may. Many of us have seen a market move dramatically on rumor or the sniff of a rumor. If a rumor or the hint of one of a large customer of the CMEDIRECT were to make it's way into the market where is the safe haven? Where is the reputation of the exchange for future business and/or difficulties? Well the CME is too big to fail. They have a direct window to the Fed, no worries. That isn't any market I'm familiar with. Where do producers and users go then for price discovery or to hedge, or one of the myriad other strategies at work in the market today?
I don't know Jeff, I really don't. I'm just an average guy. The only thing that makes me different is I know I'm average.
As for "crypto", I have a tenuous grasp of the concept, but I surely know nothing about the "plumbing" of the various "crypto" attempts and how that would work across exchanges/FCM's. I guess I would say this is where being average catches up to me and I will wait for better minds to sort it out.
The one crypto exchange I have a modicum of knowledge about is Bitnomial. I get no information, because I am a minority investor, but they are CFTC regulated which ought to give customers and markets comfort.
First of all the exchanges have been trying to disintermediate FCMs for last 30 years I chaired the FCM committee at the cbot for ten years I know
But when no firm would make markets in some thinly traded fx contracts the cme stepped in to make markets
Why is the merc freaking out to become a FCM now
When they started trading bitcoins the cme should have started a new crypto exchange with its own clearing house why
To much systemic risk in crypto tomorrow it could go to 1 million or zero there is no underlying contract Bitcoin I a derivative
So may and all FCMs will let you be long bitcoins 100% up or they will let you buy options
But for being short btc or options who would be insane enough to clear these shorts
So the cme is going to take this astronomical risk to clear these contracts because no one else does
Sounds like the cme should take a pass until you have a real asset to clear
I see both sides of the issue but I think it comes down to free market Enterprise and let the chips fall where they may and go ahead and give it a shot and see what happens.
Look, if we survived Bidenomics, we can survive this 😂
I think one idea is mistaken… “ it is the FCM that is in trouble and will suffer the financial consequences, not the exchange”. In actual practice other customers of the FCM have credit risk to the failing FCM, if the failing FCM has lost in excess of its posted margin and guarantee fund contribution, then the other contributors to the guarantee fund also suffer losses. Unfortunately, the history of fraudulent FCMs and brokers suggests that given a choice, I’d rather have my assets at the clearing house directly than with a broker (this is even before any consideration of account portability, and the horror stories of customers trying to move their positions and collateral out of a failing FCM only to have the phones go unanswered.) I don’t have a dog in this fight (exchanges owning FCMs) but there are countries (Brazil and Taiwan come to mind) where final beneficial customers’ assets are held at the clearinghouse directly with no adverse consequences that I’m aware of. Cheers.