KANSAS CITY, Mo., Nov. 5, 2008 (GLOBE NEWSWIRE) -- Agora-X, LLC, which is creating a new electronic trading and negotiation platform for commodities, has submitted a petition to the Commodity Futures Trading Commission (CFTC) to enable the clearing of over-the-counter (OTC) contracts in major agricultural commodities including wheat, corn and soybeans. Clearing of OTC contracts on the grains is not currently permitted under CFTC rules.
Agora-X is currently preparing to host institutional trading and negotiation in over-the-counter (OTC) derivatives contracts on a range of energy, metals and agricultural commodities. Although clearing of the grain contracts is not required for the operation of the Agora-X platform, Agora-X believes that allowing that clearing would be an important step forward for the transparency and efficiency of agricultural commodities markets.
The petition filed by Agora-X requests the CFTC to amend CFTC Regulation 35 (Part 35) to allow swap and swaption (option on swap) agreements, which are two-party OTC contracts priced off of agricultural commodity futures, to be cleared through a registered derivative clearing organization (DCO) such as CME, NYMEX or any other similar DCO. Contracts on many other commodities are already cleared through clearing organizations; however, Part 35 prevents the clearing of agricultural swaps and swaptions in the absence of applicant-specific CFTC permission. If the CFTC amends Part 35 as proposed by Agora-X, no such individualized permission will be necessary. More importantly, the amendments will promote clearing of agricultural derivatives and reduce counterparty credit risks. In addition, under the proposal, the cleared swap transactions would be reported to the CFTC, enhancing the transparency of the agricultural markets. Cleared OTC transactions of this type are not currently reported. This petition is of general applicability, and it is available on the CFTC's website for review and comment.
Brent M. Weisenborn, Chief Executive Officer of Agora-X, said: "We believe now is the time for the CFTC to allow clearing of OTC trades in agricultural swaps, including swaptions, which have been affected by the current credit disruption, along with other similar financial instruments. Our proposal to amend Part 35 provides for increased reporting to the CFTC and self-regulatory bodies. These changes would give agricultural swaps equal protections with other OTC contracts and promote clearing, which is critical in these markets. Use of our electronic platform will provide the major participants in agricultural markets with access to greater liquidity, credit use maximization, a clear view of pricing and efficient negotiation."
The company requested expedited consideration of the petition. "Because of the current volatile conditions in the U.S. financial markets and the desirability of providing OTC derivative market participants with access to enhanced credit management facilities, we respectfully request that the Commission review and approve this Petition on an expedited basis," Agora-X said in its submission.
Founded with seed money from FCStone Group, Inc. (Nasdaq:FCSX), a commodity risk management firm, Agora-X is creating an electronic platform to help institutional participants achieve greater transparency in the OTC commodities market. Currently, OTC trading requires market participants to contact each other individually and privately negotiate prices. The Agora-X platform will bring this negotiation process in public view and allow posting of bids and offers electronically, so individual traders participating in Agora-X will be able to see pricing of contracts, negotiate with each other, and subsequently execute trades quickly and efficiently. Agora-X expects to add a separate component of the Agora-X platform that will qualify as an exempt commercial market (ECM) under CEA Section 2(h)(5), which is expected to handle option "look-alikes" in energy as well as commodity swaps, with the scalability to add other exempt OTC derivatives.
Agora-X has worked with NASDAQ OMX Group, Inc. (Nasdaq:NDAQ) to create a best-in-class marketplace. Earlier this year, NASDAQ OMX became a developmental investor in Agora-X with a commitment to purchase a 20 percent equity interest.
About Agora-X
Agora-X, LLC is developing an institutional electronic communications network for OTC commodities contracts in collaboration with major institutional participants in the commodities market. Based in Kansas City, Agora-X was incubated as a start-up venture by FCStone Group, Inc. The Agora-X platform is designed to enable institutional participants to obtain best prices in a more liquid and transparent OTC marketplace. By efficiently monetizing/internalizing their internal order flow in this market segment, institutional traders should achieve advantage over the current trading environment. The Agora-X electronic communication platform is scheduled to launch at the end of 2008 and the ECM component of Agora-X to follow early in 2009. For more information please visit www.agora-x.com.
Cautionary Note Regarding Forward-Looking Statements
The matters described herein contain forward-looking statements that are made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements about current and future products and offerings of FCStone, NASDAQ OMX and Agora-X. We caution that these statements are not guarantees of future performance or product developments. Actual results may differ materially from those expressed or implied in the forward-looking statements. Forward-looking statements involve a number of risks, uncertainties or other factors beyond the control of FCStone, NASDAQ OMX or Agora-X. These factors include, but are not limited to, factors detailed in the annual reports on Form 10-K, and periodic reports filed with the U.S. Securities and Exchange Commission by FCStone and NASDAQ OMX. We undertake no obligation to release any revisions to any forward-looking statements.