Summary
- TD Cowen said CME Group holds a stronger legal position than the CFTC in the lawsuit over approval of perpetual futures.
- The key issue in the case is whether perpetual futures with no expiration date legally qualify as futures contracts, with differences in regulation and tax treatment between swaps and futures at the center of the dispute.
- TD Cowen said CME is likely to seek injunctive relief, with the court's hearing schedule and initial rulings set to be the main points to watch.
CME Group holds the stronger legal position in its lawsuit against the 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 Washington Research Group, sees CME as having the upper hand on both procedural and substantive grounds.
At the center of the case is whether perpetual futures, which have no expiration date, legally qualify as futures contracts. The distinction matters because swaps and futures are subject to different regulatory and tax frameworks.
Swap dealers must register and are generally subject to margin rules based on a five-business-day standard. Futures, by contrast, are subject to one-day margin rules and may also receive more favorable tax treatment.
Seiberg also expects CME to seek injunctive relief. He said the court's hearing schedule and any initial rulings will be the main points to watch in the case.
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