CME CeO Says OTC Position Limits Must Be Applied Fairly

The top executive of CME Group Inc. (CME) said Wednesday that he is concerned that proposed regulatory reform may give some players in the over-the-counter derivatives market an unfair advantage.

CME, the world's largest futures exchange operator by volume, is competing with rivals to clear swaps and other OTC products, as regulators push clearing as a way to reduce systemic risk in the $600 trillion derivatives market.

Financial regulators on both sides of the Atlantic are seeking authority to implement position limits on over-the-counter trade.

But CME Chief Executive Craig Donohue warned Wednesday that implementation must ensure a level playing field for exchanges and clearinghouse operators.

"We don't want a situation where the government is allocating market share among competitors," Donohue said at a Futures Industry Association gathering here.

While this may not be regulators' intent, he said, "this could be an outcome of a methodology that could be adopted."

Of particular concern, Donohue said, would be how regulators define unsafe concentration of positions at one venue.

Commodity Futures Trading Commission Chairman Gary Gensler said at the same event on Wednesday that excessive speculation, in terms of concentrated positions, can be treacherous for the economy in times of market turmoil.

"How you unwind large positions is on our mind," he said.

-By Jacob Bunge, Dow Jones Newswires; (312) 750 4117; jacob.bunge@dowjones.com

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