The bitter competition between FMX and the CME, for trading of US Treasuries and Treasury futures, could enter an accelerated phase as new clearing offerings create more potential paths to success.
Both firms are competing to trade US Treasuries, the government bonds, and US Treasury futures, the derivatives based on the bonds. Trading both instruments efficiently is highly attractive to investors, banks and proprietary trading firms.
Clearing of trades for US Treasuries products was a sticking point in the launch of FMX’s offering, with the CME’s Chair and CEO, Terry Duffy, noting that the FMX clearing model using a UK-owned central counterparty (CCP), LCH, should be considered a risk by US authorities.
Now ICE Clear Credit (ICC) looks set to launch clearing in the US, offering a potential rival in the US to LCH for FMX’s attentions. It may also rival CME’s inhouse clearing operations and DTCC.
Furthermore, ICE strengthened its European playbook when it appointed Jonathan Hill, former European Union commissioner for Financial Stability, Financial Services and Capital Markets Union, to its board of directors in September 2025.
On Friday the comment period for its application to clear US Treasury securities closed, and it saw no push back from commentators, suggesting a clear path to opening up.
“Last year, ICE announced its intention to enter the US Treasury clearing business,” wrote Bank of America analysts, Craig Siegenthaler and Eli Abboud, in a February 2025 paper. “It is set to compete with incumbent DTCC as well as two other new entrants, LCH and CME. Unlike all of these tentative competitors, however, ICE will not be able to offer any capital offsets with other US interest rate products. CME and LCH will presumably offer portfolio margining with their large pools of futures and swaps collateral, respectively. ICE, though, does not presently have any meaningful exposure to US interest rates. An FMX/ICE margining arrangement could incorporate ICE’s new Treasury clearinghouse and potentially allow for futures/cash cross-margining analogous to the existing CME/DTCC relationship.”
Competitive clearing
Clearing of securities is mandated by US authorities to reduce systemic risk in treasury trading, with a compliance date for eligible cash market transactions of 31 December 2026. Clearing houses are able to protect one trading firm from the default of a counterparty trading firm, by taking over the other side of the trade. This reduces the risk of a default having a cascading impact on multiple firms.
Historically, clearing houses/CCPs have also been used to try and create competitive pressure on exchanges that have in house clearing operations, such as CME and Eurex. By limiting the commercial advantage created by efficiency from keeping trading and clearing in a single silo, rivals have sought to break apart the functions through commercial pressure.
In the US, futures exchange ELX tried to create a ‘Exchange of Futures for Futures’ (EFF) model which would let firms trade on rival exchanges to the CME but still clear positions via CME Clearing. ICE itself had previously launched a protocol called the basis trading facility (BTF) which did a similar thing.
However, the CME, which is a self-regulatory organisation, told members in both cases that such models would violate its own rules.
“As permitted by the Commodity Exchange Act, CBOT [now CME] will continue to prohibit EFFs, which would reduce transparency and price discovery in CBOT Treasury futures markets,” it wrote in 2010. “CBOT competes with other exchanges on the basis of our liquidity and market efficiency, our technology, clearing and risk management services, and the quality of our market regulation programs. Customers can choose between competing offerings based on legitimate factors such as these.”
ICE Clear focus
ICE chairman and CEO, Jeff Sprecher, has emphasised that his firm plans to innovate in clearing, potentially supported by the use of distribute ledger technology (DLT) acquired when it bought online betting market operator, Polymarket, this year.
“ICE is in the process of rolling out an advanced clearing model for our global clearing houses, one that we’ve very elegantly named ICE Risk Model 2,” he said. “Our new clearing system was built on the existing local banking and regulatory infrastructure for funds movement and collateral management. However, the current regulatory environment is being confronted by collateral management using tokens, which I believe will help evolve regulatory oversight to take advantage of 24/7 capital movement.”
He used the example of a someone making a sports bet using Polymarket and its capacity to transfer value.
“There can be a person watching a game, and they can say, I think this person is going to miss the next shot. And I’ll bet $5 on that,” said Sprecher on the firm’s Q3 earnings call. “The shot is made and buyer and seller exchange value. Money moves via smart contract … that is really novel. That is outside of a clearing infrastructure.2
It could unlock 24/7 capital movement he argued, reducing the need to hold collateral in local treasury functions around the world, and thereby lowering the cost of doing business.
“You’re going to be able now to keep capital, maybe, in the central treasury and move it on demand at a moment’s notice using the internet,” he said. “ICE intends to be at the forefront of driving this evolution, given our own use case of operating 6 global clearing houses with differing collateral and regulatory environments. Such an evolution can make global clearing and trade settlement more efficient … clients tend to keep excess collateral at all six because of the banking hours that are required to move capital around when those particular clearing houses are open. And we think, by having 24/7 collateral management, we’ll be able to minimise overall collateral requirements for our customers. And that will feed its way into higher trading volumes, which is we have seen that correlation. So it’s in our interest to help make our customers’ trading more efficient.”
If the current regulatory environment were favourable to innovation, and the use of digital assets, ICE might find that it has more fertile ground to provide rival clearing for other firms such as FMX which do not operate their own facilities, but also to crack into siloed exchanges to try and either poach trading or clearing business, using new approaches.
ICE’s next earnings call is expected on 18 December 2025.
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