TD Cowen Says CME Has Upper Hand Over CFTC in Perpetual Futures Lawsuit
Summary
- TD Cowen said CME Group holds a stronger legal position in its lawsuit with the CFTC over the approval of perpetual futures.
- Jaret Seiberg, a managing director, said the central issue is whether perpetual futures with no expiration date legally qualify as futures contracts.
- He said differences in swaps, futures, margin rules, and tax benefits also suggest CME is likely to seek an injunction.
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CME Group has the stronger legal position in its lawsuit against the US Commodity Futures Trading Commission over the approval of perpetual futures, TD Cowen said.
The Block reported on June 19 that Jaret Seiberg, a managing director at TD Cowen's Washington Research Group, views CME as better positioned both procedurally and substantively.
At the center of the case is whether perpetual futures with no expiration date legally qualify as futures contracts. The distinction matters because swaps and futures are governed by different regulatory and tax regimes.
Swap dealers must register and are generally subject to margin rules based on a five-business-day standard. Futures, by contrast, face one-day margin requirements and may also receive favorable tax treatment.
Seiberg expects CME to seek an injunction. He said the court's hearing schedule and any early rulings will be key developments to watch in the case.
JH Kim
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