| BOCA RATON, Florida, March 14
BOCA RATON, Florida, March 14 CME Group Inc
, the world's largest futures exchange operator, is
facing mounting criticism from brokers over fee increases that
are set to raise costs for futures customers.
CME, which owns the Chicago Board of Trade, Chicago
Mercantile Exchange and others, has been meeting constantly with
brokers upset over adjustments to transaction and market-data
fees that were announced in November, Executive Chairman
Terrence Duffy told Reuters this week.
Meetings picked up this week during an annual industry
conference in Florida.
"We're taking a very judicious look at how we're
implementing this data fee and, not only the data fee, but the
increase in general," Duffy said in an interview at the
conference. "If we're missing something that we didn't see,
we're listening to it. That's yet to be completely analyzed."
CME on Nov. 12 said it would begin charging fees to those
who distribute its market data. The fees took effect immediately
for new data users and could be delayed until 2015 for existing
users who qualified for waivers. The exchange operator also
increased transaction fees this year for nearly all its major
products as part of its first significant fee hike since 2009.
CME expects revenues from transaction fees to rise 2 percent
to 3 percent because of the increases, Chief Financial Officer
James Parisi said on an earnings call last month. He projected a
"somewhat meaningful" revenue increase from higher market-data
CME likely won't be able to expand profits as planned
because customers will consolidate data terminals rather than
pay the market-data fees, said Gerald Corcoran, chief executive
officer of RJ O'Brien and Associates, the largest independent
U.S. futures broker.
RJ O'Brien met with CME at the conference in Florida to
discuss the fees and projected they will cost its customers
several million dollars a year.
"We built our systems on the understanding, belief and
agreement with the CME that we wouldn't be charged market-data
fees for providing our customers access to the market, and
they've pulled the rug on us," Corcoran said in an interview.
The market-data fees are overreaching and were "put together
without significant consultation from their FCM partners,"
Corcoran said. CME is listening to concerns about the fees, but
appears "very, very firm in their policy right now," he said.
The Futures Industry Association, which represents brokers
and exchanges, last month sent a letter to CME expressing
concerns about the fees. It helped to arrange meetings on the
topic at the conference this week.
Brokers say the increases were ill-timed because the futures
industry is still struggling with the Federal Reserve's
extension of near-zero interest rates. Low interest rates for
years have eradicated hope of a rebound in a key source of
income: interest on customers' margins. While most large brokers
must pass interest earned on collateral back to their customers,
smaller firms were able to retain most of that revenue.
Brokerage executives from Newedge, Citigroup Global Markets
and Rosenthal Collins Group said during a panel discussion at
the conference on Thursday that their biggest challenge was
"The reality is as fees go up you're always going to get
folks complaining," said George Simonetti, head of markets
clearing and futures execution for Wells Fargo Securities.
Higher fees from exchanges are passed "straight through to the
client," he said.
In November, Leslie Rosenthal, managing member of Rosenthal
Collins and a former Chicago Board of Trade chairman, circulated
a letter calling on CME to delay the fee increases. CME said it
had deferred from making substantial fee changes since 2009 to
be "mindful to client impact during a challenging market