CME Group Inc. attorneys told a U.S. judge that a lawsuit by Chicago Board of Trade traders and brokers seeking to preserve open-outcry price settlement belongs in a federal court, not a state court.
Twenty-four agricultural traders and brokers filed a state court lawsuit on June 22 seeking an order blocking the world’s biggest futures market from changing their traditional method of price settlement to a blended method incorporating electronic trading activity. The new procedures went into effect yesterday.
The traders filed their suit in an Illinois state court in Chicago, seeking an injunction. CME Group attorneys had the case moved to federal court in Chicago, saying the case involved the U.S. Commodities Exchange Act provisions and that the U.S. Commodity Futures Trading Commission should be added as a party.
“There’s clear preemption” of state court jurisdiction, CME Group attorney Jerrold Salzman told U.S. District Judge John Darrah at a hearing today.
More than 90 percent of agricultural futures contract trading is already done electronically, Salzman said, adding that the traders weren’t entitled to an injunction.
The traders say in their complaint that the new procedures are reducing the volume of orders they process and threatening their livelihood.
CME Group, parent company of the Chicago Mercantile Exchange, acquired the Chicago Board of Trade in 2007. The new open-outcry rule changes don’t apply to CME livestock futures traders.
Darrah said the jurisdictional issues were complicated and that his decision will take “some time.”
The parties are due back in court on Aug. 14. Darrah said he may issue a ruling before then.
“Obviously, we want to be heard as soon as possible,” George Sang, an attorney for the traders, said after court.
R. David Gary, a spokesman for the CFTC, did not immediately reply to a voice-mail message seeking comment.
The case is McKerr v. The Board of Trade of the City of Chicago Inc., 12-cv-5008, U.S. District Court, Northern District of Illinois (Chicago).