CME Group Has Been Preparing For Clearing Member Defaults For Years

The “credit facility” arranged by the CME Group does not necessarily mean that any of its exchanges are at immediate risk of such defaults…

by Chris Powell of the Gold Anti-Trust Action Committee (GATA)

12:18p ET Friday, May 1, 2020

Dear Friend of GATA and Gold:

Yesterday’s MarketWatch report about the “credit facility” arranged by CME Group, operator of the major U.S. futures exchanges, to cover defaults by clearing members of its exchanges —

http://gata.org/node/20108

— does not necessarily mean that any of its exchanges are at immediate risk of such defaults.

The report appears to have been prompted by CME Group’s filing with the U.S. Securities and Exchange Commission a notice of an amendment to the “credit facility”:

https://secfilings.nasdaq.com/filingFrameset.asp?FilingID=14108931&RcvdD…

A previous filing indicates that CME Group has had such a “credit facility” at least since 2017:

http://investor.cmegroup.com/node/43841/html#d732408dex101.htm

According to the filings, many big international banks are providing the credit. That might imply that the stable operation of CME Group’s futures exchanges is considered vital to the world financial system, or at least to those big international banks themselves.

What is the new amendment changing about the credit being extended to CME Group, and is there anything especially notable about the timing?

GATA could ask CME Group to explain this but we’re still waiting for a reply to our inquiry of a couple of weeks ago as to why the new Comex gold futures contract offering the option of “delivery” via a certificate for a quarter interest in a 400-ounce bar wasn’t even trading after being touted as the solution to the recent unusual disparity between gold prices in New York and London.

As of yesterday, according to CME Group’s data, the open interest in the new 4GC contract is only one:

https://www.cmegroup.com/trading/metals/precious/gold-enhanced-delivery_…

But then what would the gold market be without its incongruities, mystery, and deception?

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
[email protected]

* * *

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