KANSAS CITY, Mo., Nov. 17, 2008 (GLOBE NEWSWIRE) -- Agora-X, LLC, which is creating a new electronic trading and negotiation platform for commodities, has petitioned the Commodity Futures Trading Commission (CFTC) for an order to allow Agora-X to clear trades in agricultural swap and swaption contracts negotiated on its platform to a registered Designated Clearing Organization (DCO). Clearing of over-the-counter (OTC) trades in agricultural swaps and swaptions including wheat, corn and soybeans, which current CFTC rules do not allow without a specific exemption, is desirable because it would reduce counterparty risk between market participants, a concern during the current financial market disruption.
The Agora-X petition seeks an exemption, under Section 4(c) of the Commodity Exchange Act (CEA) and CFTC Rule 35, to allow clearing of agricultural swaps and swaptions negotiated on the Agora-X platform. The public interest would be served by the availability of an efficient electronic communications platform allowing negotiation in these contracts between qualified institutions, such as grain companies, the Agora-X request noted. This petition is among several other 4(c) petitions already filed by the CME, CBOT and The ICE. The Agora-X petition is expected to be available on CFTC's website in the near future.
Current CFTC rules allow clearing of OTC trades for other types of commodity contracts, but not agricultural swaps and swaptions. As previously announced, Agora-X also has submitted a petition to the CFTC to change Part 35 to enable clearing industry-wide of OTC agricultural swaps and swaptions. If Part 35 is amended, the 4(c) exemption would not be necessary.
Agora-X is currently preparing to host institutional trading and negotiation in 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.
Brent M. Weisenborn, Chief Executive Officer of Agora-X, said: "There seems to be broad agreement that the CFTC should begin to allow clearing of OTC trades in agricultural swaps, including swaptions, given the impact of the current credit difficulties on the markets. The Agora-X electronic platform is designed to provide major market participants with greater liquidity, a clear view of pricing and efficient negotiation. Clearing would address counterparty concerns that currently accompany OTC trading in agricultural contracts."
Agora-X requested expedited consideration from the CFTC because of the volatile conditions in the financial markets and the desirability of providing enhanced credit management facilities to market participants.
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.