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CME's Volume 'Disaster' Due to Macro Woes: Exec

The decline in trading on CME Group Inc's futures exchanges this year is more the result of a sluggish economy and uncertainty over tax policy rather than regulatory changes affecting the futures industry, CME's executive chairman said on Thursday.

The decline in trading on CME Group Inc's futures exchanges this year is more the result of a sluggish economy and uncertainty over tax policy rather than regulatory changes affecting the futures industry, CME's executive chairman said on Thursday.

"Regulatory issues have a play in it - but this year was setting up for a disaster in volumes from day one," CME's Terrence Duffy said on a conference call discussing the company's third-quarter results. Profit plunged in the quarter, as trading fell 26 percent.

Regulators have been churning out new rules to implement Wall Street reform legislation, and confusion over new requirements has been cited as one factor hurting futures industry volume.

Indeed, a regulatory "about face" on rules for the swaps market confused markets and slammed CME's Clearport energy clearing business for a two-week period in early October, Duffy said on the call.

But volumes recovered once regulators exempted Clearport energy swaps until the end of the year from counting toward thresholds that trigger higher capital requirements for swaps traders, Duffy said.

A sluggish economy and near-zero interest rates have hurt trading, and Duffy said on Thursday that investors are keeping cash on the sidelines as they wait for more clarity on the economic outlook and fiscal policy next year.

"We will get clear skies and smoother waters as time goes on," he said.

Copyright 2010 by Reuters. All rights reserved.

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