BrokerTec out of the Gates. (Rebates or Kickbacks?)
The moment the floor staff of the Chicago Board of Trade (CBOT) (CME) has been dreading for years is now here: BrokerTec's futures trading platform kicked in at the end of November, along with a Reuters report that the consortium expects to grab 30% of Chicago's U.S. Treasury debt volume within the next 12 months, and 70% in 24 months.
Citing a confidential offering statement for BrokerTec Futures Exchange's Class B shares, the report claims BrokerTec's low fee structure would leave the capital-intense CME and CBOT in the dust. A spokesman declined to comment, citing the confidential nature of the offering.
While the consortium's average of 4,000 trades per day may be impressive after just 25 trading days for a new venture, it's still puny compared to the CBOT's daily total of well over 1 million, indicating so far that BrokerTec will need every moment of those 12 months to catch up.
Meanwhile, BrokerTec's stunning first 18 months of operation in the cash market came under criticism for its use of a confidential incentive program that offered rebates to companies that generated large volume. …