Cantor Fitzgerald and New York City's Board of Trade launched their controversial Cantor Financial Futures Exchange Tuesday.

The electronic Treasury futures trading platform got Commodity Futures Trading Commission approval last Friday.

The Cantor Exchange initially will trade U.S. Treasury bonds and 10- year, five-year, and two-year note futures contracts.

Minutes after CFTC's approval was announced, the Chicago Board of Trade, a longtime vocal opponent of the Cantor Exchange, fired off a response. Its chairman, Patrick H. Arbor, said:

"CBOT ... will not stand idly by while an unsound and untested exchange threatens the integrity of the entire market. CFTC's rushed approval of (Cantor Exchange) demonstrates a total disregard for the laws the commission is charged with enforcing."

Cantor Exchange's use is predicated on its interactive matching system, which Cantor has used for its U.S. Treasury business since 1996.

"CX enables all market participants, no matter where they are physically located, to trade, on one level playing field, more directly, anonymously, efficiently, and cost-effectively than ever before, said Howard Lutnick, president and CEO at Cantor. "CX brings an end to the monopoly in the U.S. Treasury futures. A trader will see a bid and size, an offer and size, and then can see the order as it is worked up."

Mr. Lutnick and Joe O'Neill, president of financial products at the New York City Board of Trade, said they hope to have the system open 24 hours a day within a few weeks. "Cantor already is installed with terminal operators in Europe and Asia, pending local regulatory approvals," Mr. Lutnick said.

He predicted that participants, who must pay a $1,000 fee to trade on Cantor Exchange, will more than halve their costs for trade executions. Real-time pricing of Cantor Exchange products will be distributed over hundreds of thousands of Bloomberg, Reuters, Bridge, and proprietary Cantor screens.

Mr. Lutnick referred to the opposition by the Chicago board and other exchanges as "stall and delay tactics." Their opposition led Cantor to submit additional paperwork to the CFTC in August, detailing Cantor Exchange's operating structure.

Jim Bowe, president of the New York board, said the depth and breadth of CFTC deliberations on Cantor Exchange should have answered any question raised by opponents. "CBOT won't stop trying to stop us," he said.

However, others fell squarely into CBOT's camp.

"We are disappointed, and we do not feel it is for the long-term benefit of the industry," said Michael Braude, president of the Kansas City Board of Trade.

"I'm surprised by CFTC's rush to judgment. Our exchange can compete if the regulatory requirements are equal, but if the bar is lowered, that changes things," said James Lindau, Minneapolis Grain Exchange president.

Cantor Exchange will give the more traditional exchanges a run for their money, sources said. Market players said CBOT's after-hours trading platform, Project A, fails as often as a couple of times a week because of heavy trading volume.

"Project A was never built for this volume or rapidity of business," one source said. "A great deal of mornings, it goes down on more than one occasion. Traders are forced to make a hedge trade in the cash market."

Sources said Cantor already is benefiting from the gaffes at CBOT, which has not acted quickly enough to correct system errors associated with capacity. For example, Project A processes 1.8 trades a second, but Cantor processes 150, sources said.

"Cantor is clearly capable," said a source. "They're the No. 1 dealer of Treasuries in the cash market, and they're dealing with every end-user worldwide. The heart of the issue is that CBOT is facing competition."

This article first appeared in a sister publication of

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