Speaker 1: Bloomberg Audio Studios, podcasts, radio News.
Speaker 2: We're going to now talk about a different part of
Speaker 2: the market. A big move on Wall Street happening right now.
Speaker 2: Cantor Fitzgerald has got the backing of major names on
Speaker 2: Wall Street for its upcoming new futures exchange SMX. Investors
Speaker 2: from Bank of America, Barclays, Citadels, Securities, City, Goldman, and
Speaker 2: JP Morgan invested more than one hundred and seventy million
Speaker 2: dollars for a nearly twenty six percent stake in FMX,
Speaker 2: which will increase as they keep.
Speaker 3: Using that platform.
Speaker 2: We're going to bring in Canter Fitzgerald Chairman and CEO.
Speaker 2: Howard Lucknick. You've talked a little bit about this before,
Speaker 2: this idea of taking on CME in the future's business.
Speaker 2: How do you take on a giant today with the help, frankly,
Speaker 2: of every major Wall Street bank?
Speaker 4: All right?
Speaker 1: So BGC BGC Group Public Company owns this exchange, right,
Speaker 1: and so we are the wholesaler of the world. So
Speaker 1: you think when Fidelity or Pimco, when they wake up
Speaker 1: in the morning want to buy something, they call a
Speaker 1: big bank.
Speaker 4: Who do those banks call? Like, what do they do? So?
Speaker 1: BGC Group is the broker in between. So we're sort
Speaker 1: of the exchange for everything in the world that doesn't.
Speaker 4: Trade on an exchange.
Speaker 1: And everybody always asked me, if you're the exchange for
Speaker 1: everything that doesn't trade on an exchange, why don't you
Speaker 1: become an exchange. So BGC set up FMX to build
Speaker 1: a futures exchange to compete with the incredible monopoly of
Speaker 1: in America, the Chicago Mercantolic Exchange, which is awesome.
Speaker 4: It's worth eighty billion dollars.
Speaker 1: And stands alone did ninety nine percent of futures in
Speaker 1: America last year. It seems like a monopoly to me.
Speaker 1: So all these banks came in as a partner. Ten
Speaker 1: of the greatest trading firms one through ten, JP, Morgan Goldman, Sachs,
Speaker 1: City Group, Morgan, Stanley, Wells, Fargo, Barkley's I don't even know,
Speaker 1: i'mly going to leave someone else's Bank of America, Citadel,
Speaker 1: you know, Jump Trading, the number one futures trader in
Speaker 1: the world, Tower number one treasury traders.
Speaker 4: These all are.
Speaker 1: Together, all coming behind this exchange to make this exchange
Speaker 1: so fun and so amazing.
Speaker 2: Well, here's the question of CME as you say, has
Speaker 2: ninety nine percent of the volume. Here, how come these
Speaker 2: banks have supported you in this? What is the outcome
Speaker 2: that you and them are looking for?
Speaker 1: Well, look, when you're alone, like the CMEME, they do
Speaker 1: as I say, they serve a they have a great
Speaker 1: product and they charge.
Speaker 4: They charge a great price, like holy.
Speaker 1: Moly, and sort of like every Christmas they just raise
Speaker 1: their price.
Speaker 4: You know, it's a Christmas present, let's just raise our price.
Speaker 1: So the banks want an alternative, they want a competitor.
Speaker 4: And what else they want is innovation. So we have the.
Speaker 1: Fastest system right, the tightest spreads. And we did this
Speaker 1: in US treasury. So we started with the US Treasury
Speaker 1: now had when we announced that we were going to
Speaker 1: be in the US treasury market, like in exchange, they
Speaker 1: had eighty five percent market share to see me, so
Speaker 1: I call them the heavyweight cham right, and there was
Speaker 1: fifteen percent by other players.
Speaker 4: So we went in.
Speaker 1: We now have twenty eight percent and they're in the
Speaker 1: mid sixties. So if someone thinks we can't get a
Speaker 1: glove on the champ.
Speaker 4: They're wrong. They're not watching. So the treasury business was one.
Speaker 1: Now we're going to do treasury futures you might say, well,
Speaker 1: why shouldn't you win in that as well, And the
Speaker 1: answer is, I think we're going to and we're going
Speaker 1: to do SOFA futures, which are like interest rate swaps,
Speaker 1: and that's going to be amazingly cool as well.
Speaker 2: You've been talking about this interest rate business treasuries in
Speaker 2: particular as well. Are there other markets that you would
Speaker 2: look to break into that you're not currently in.
Speaker 1: Well, we're going to start with the interest rate world.
Speaker 1: But when you've got the world's created trading firms as
Speaker 1: your partner, they're going to say what's next. And I
Speaker 1: would think other futures exchanges to start will be a
Speaker 1: classic move as we go around the world, equities, bonds,
Speaker 1: it's a futures exchange. You can do anything, So it's
Speaker 1: really fun. We have the technologies doing in place. See
Speaker 1: the thing about BGC Group is it already has the
Speaker 1: connection to all these people.
Speaker 4: We don't have to start building it today.
Speaker 1: We're going to open in September, right, and we're going
Speaker 1: to start and you know, with that futures exchange, you
Speaker 1: just want everybody to connect. So the first year we're
Speaker 1: going to get everyone to connect. Second year we're going
Speaker 1: to get everyone trading, and in the third year it's
Speaker 1: going to be full blown, a full on competition for
Speaker 1: the eighty billion dollars heavyweight chair.
Speaker 2: We'll talk about that timeline in a second, but you
Speaker 2: had mentioned the Christmas present of higher fees from the exchanges.
Speaker 2: Do you plan to lower trading costs on this new
Speaker 2: venue with.
Speaker 4: The word for certain be helpful?
Speaker 1: Yes, absolutely, absolutely, absolutely.
Speaker 4: The concept of being much more efficient, much.
Speaker 1: Faster, and much cheaper will create eight more volume, will
Speaker 1: be innovation.
Speaker 4: We'll do all sorts of things.
Speaker 1: We'll build an example, if you want to trade one
Speaker 1: futures contract against another futures contract, it's built into the
Speaker 1: trading system, so you can't miss. It's atomically built in,
Speaker 1: rather than two different systems sort of trying to figure
Speaker 1: it out.
Speaker 4: I mean, you can just be.
Speaker 1: Innovative, clever, smart, and faster, and the banks are all
Speaker 1: behind us, the greatest traders in the world behind us,
Speaker 1: the greatest technology that's already installed.
Speaker 4: I think we're I'm really I'm.
Speaker 1: If I don't seem like I'm having fun, you haven't
Speaker 1: spent time with me.
Speaker 4: This is so much fun for us, Howard.
Speaker 2: Today it's valued at six hundred and sixty seven million
Speaker 2: dollars with the new backers that you've bought on board.
Speaker 2: You've kind of mentioned it through your timeline to you
Speaker 2: expand the business.
Speaker 3: What is this company valued in three to five years?
Speaker 1: Well, it's sort of like one of my favorite thoughts
Speaker 1: is when George Clooney tasted some tequilas, right, and he
Speaker 1: bought a tequila company. How much was that tequila company worth?
Speaker 1: I think he bought it for like seven million dollars
Speaker 1: and then he sold it for seven hundred million. So
Speaker 1: these banks are my George Clooney, you know, I see
Speaker 1: the mom like, these guys are just so these men
Speaker 1: and women are just so handsome.
Speaker 3: Goal, do you have a target on how big you
Speaker 3: want to get?
Speaker 1: I think we want to gain market share. Likely we've
Speaker 1: done in US treasuries. Our US treasury business, which competes
Speaker 1: with the Chicago market dollars change, grows one to two
Speaker 1: points market share every single quarter.
Speaker 4: So we were twenty six percent at the end of
Speaker 4: the year. We just put out.
Speaker 1: This morning with you guys twenty eight percent this quarter,
Speaker 1: so two percent per quarter.
Speaker 4: I think we're going to keep growing.
Speaker 1: We'll get to half and I think our futures exchange
Speaker 1: will just keep growing and eventually we'll get to half
Speaker 1: and I think that eventually will become enormously valuable for
Speaker 1: us for competition. It'll drive down costs, it'll drive up volumes,
Speaker 1: It'll be great for melic.
Speaker 2: It's interesting to hear you come in and talk so
Speaker 2: much about grow because when you look across Wall Street
Speaker 2: right now, it's hard to find a lot of growth,
Speaker 2: particularly when it comes to headcount and expansion. What does
Speaker 2: this mean for all of your companies, Canner Fitzgerald BGC
Speaker 2: in terms of what you want to be able to
Speaker 2: do bring more people on board?
Speaker 3: Is that possible for you?
Speaker 4: Sure?
Speaker 1: I mean to be. When you're innovative, you can create
Speaker 1: new things. So we're hiring tech people up a storm.
Speaker 1: BGC is growing amazingly.
Speaker 4: Stock was up. BGC group was up ninety.
Speaker 1: Percent last year, and it's on a tear again and
Speaker 1: it's going to be imagined. You have this exchange where
Speaker 1: all these banks going in at a six hundred and
Speaker 1: sixty seven million dollar valuation.
Speaker 4: But that was yesterday.
Speaker 1: What do you think it's worth today with all these
Speaker 1: banks as your partners, multiples and multiples higher. I'm sure
Speaker 1: private equity firms would love to invest at three or
Speaker 1: four times that much. We aren't sellers. We're going to
Speaker 1: build a great business. BGC is growing up a storm,
Speaker 1: and so is Cantor. So I think there's lots of
Speaker 1: growth ahead.
Speaker 2: So let's talk about the markets now too, because you're
Speaker 2: in the treasury business. Of course, we have the two
Speaker 2: year about to touch five percent once again, a lot
Speaker 2: of expectations changing in this market, Treasury auctions coming at
Speaker 2: really a record clip.
Speaker 3: Almost across the curve. What kind of volatility does that create?
Speaker 2: And where do you think the treasury market really goes
Speaker 2: from here this year?
Speaker 1: All right, So we have two things that are incredible
Speaker 1: to think about. The Fed's balance sheet is seven point
Speaker 1: five trillion dollars and that's got to come down.
Speaker 4: So that means they're not going to buy the treasuries.
Speaker 4: They need someone else to buy them.
Speaker 1: That coupled with our beautiful government running deficits of one
Speaker 1: point eight trillion a year, so you've got just huge supply,
Speaker 1: huge supply coming that's got to keep rates higher for longer.
Speaker 1: It has to keep rates higher for longer.
Speaker 4: I view it as steady.
Speaker 1: Right when I was here in January with you guys,
Speaker 1: I said rates would be steady, and where have they
Speaker 1: been since then? Steady? They remember people were talking about
Speaker 1: six or seven cuts. I was like, ha, ha, well
Speaker 1: who was cutting six or seven times? I think the
Speaker 1: Fed is gonna stay steady. I think inflation is stubborn.
Speaker 1: We're hanging in there. You're seeing the two year note.
Speaker 1: Think about this. The market is saying two years at
Speaker 1: five percent? So what's the core market really saying. They're saying,
Speaker 1: we're not really going anywhere right where? I mean what
Speaker 1: short term rates are at five and a quarter? So
Speaker 1: if you said the average for the next two years
Speaker 1: was gonna be five percent, right, what you're saying, We're
Speaker 1: going to stick around here?
Speaker 4: And we are.
Speaker 1: So the Fed has the ability to cut a little
Speaker 1: because remember, if they let go of their balance sheet,
Speaker 1: that's tightening, right. I'm not buying anymore, you're gonna buy.
Speaker 1: That's gonna take money out of the system. When the
Speaker 1: FED stops buying and cuts its balance sheet, that's a tightening.
Speaker 1: So the FED can cut a little bit of interest rates.
Speaker 3: When's that first cut?
Speaker 1: I think right before the election, Not that the FED
Speaker 1: is involved in elections, but September.
Speaker 4: I'm thinking, I'm thinking.
Speaker 1: September, and it's not really to move the economy. It's
Speaker 1: to show off a little bit, help a little bit.
Speaker 1: You know, the guy who's employing you today, maybe he'll give.
Speaker 4: You your job again if he gets elected. Can't hurt.
Speaker 1: So I think September one cut. That's it, just showing
Speaker 1: off and I'm really doing it.
Speaker 2: Really curious about your views on the election here too.
Speaker 2: Earlier this month, you hosted a fundraiser for Donald Trump
Speaker 2: alongside John Paulson in Palm Beach. What would a potential
Speaker 2: Trump presidency trump two point zero?
Speaker 3: What would that mean for the markets?
Speaker 4: Well?
Speaker 1: Again, he last time, if you remember, there was a
Speaker 1: lot of consternation when he was elected, and my view
Speaker 1: was it will be good for business, it will be
Speaker 1: good for the banks, and it was the banks traded
Speaker 1: incredibly Well. You know, the Republican Party is a less
Speaker 1: regulatory party, right. You saw the Federal Trade Commission just
Speaker 1: came out and said non competes are something they want
Speaker 1: to do away with.
Speaker 4: That's not really business friendly.
Speaker 1: Right, So an administration that's more business friendly probably is
Speaker 1: good for stocks, although you can't say lately, Joe Biden's
Speaker 1: not good for stocks. The market's doing perfectly fine, and
Speaker 1: stocks are doing perfectly fine, So I think it's not
Speaker 1: going to be as much as people think. But I
Speaker 1: think a Trump administration is just less regulatory, which businesses like.
Speaker 4: Less like the.
Speaker 1: Federal Trade Commission saying non competes. You know, they got
Speaker 1: sued right away. So it just seems overbroad less regulation
Speaker 1: is good for markets, good for business, and I think businesses.
Speaker 4: Like that better.
Speaker 2: Well, what do you think this means in terms of
Speaker 2: the attitudes from the business community around Donald Trump? Do
Speaker 2: you think that there's any changes that you've seen, particularly
Speaker 2: given that you have such a closier to the ground.
Speaker 4: I think it's you feel more coming. I think they were.
Speaker 1: They were afraid in the beginning, I think when it
Speaker 1: was still during the primaries.
Speaker 4: But you feel more and more people coming.
Speaker 1: Surprisingly, people who would never have said that before come
Speaker 1: up to me and say, you know, I'm thinking about
Speaker 1: it because they really don't like immigration. I mean they
Speaker 1: just immigration is just something like who talks about immigration
Speaker 1: at dinner parties? The answers these days, everybody talks about it.
Speaker 1: I mean, you have it in New York, everywhere, you
Speaker 1: have it in San Francisco everywhere, so immigration matters, and
Speaker 1: just the things like today with the Federal Trade Commission.
Speaker 1: I mean, it's just, you know, it's just big regulatory push.
Speaker 1: So I think business is moving more towards the Republican side,
Speaker 1: surprisingly more towards the Republican side than they were before.
Speaker 1: But I think it's going to be a tough forward election.
Speaker 1: I really think it's going to be dead heat.
Speaker 3: Close, dead heat close.
Speaker 2: How do you think that translates to volatility into the
Speaker 2: markets throughout the year and into next even given the
Speaker 2: challenges you're seeing around the world, and given the challenges
Speaker 2: you're seeing in the US's own economy starting to come up.
Speaker 1: I think big volatility come the end of September going
Speaker 1: into the election. I mean the uncertainty, well, investors tend
Speaker 1: to put their hands in their pockets when they don't
Speaker 1: know what's going on, right when you have a good
Speaker 1: confidence of where you're going and you go investing. So
Speaker 1: I think volumes will decline a bit and volatility will
Speaker 1: rise because people won't know which way they're coming or going.
Speaker 1: So I think October is going to be just a
Speaker 1: crazy time because people won't know what the heck is
Speaker 1: going on and the election. You know, it's amazing about
Speaker 1: elections in America. Once it's settled, markets go right back
Speaker 1: to normal. So I think once it's settled, I think
Speaker 1: you're going to have a much better market than you're.
Speaker 4: Going to in October.
Speaker 2: Another volatile asset bitcoin, You have been very vocal in
Speaker 2: your kind of constructive view about bitcoin, particularly as it's
Speaker 2: used around the world.
Speaker 3: Interesting though, you did.
Speaker 2: Say that it would be benefiting and be bounding this year,
Speaker 2: but you didn't say that the ETF would necessarily bring
Speaker 2: it there.
Speaker 3: Would you be a buyer of bitcoin at these levels?
Speaker 1: I think so bitcoin just had right, which means that
Speaker 1: the work you do to get a bitcoin, the price
Speaker 1: is twice as high. So that is theoretically a benefit
Speaker 1: for the next four years for bitcoin. So I think
Speaker 1: over time bitcoin will rally even from here over the
Speaker 1: next four years.
Speaker 4: So if you bring me back four.
Speaker 1: Years from today, I think the market will be will
Speaker 1: be higher. And I think these things. It has a
Speaker 1: place in the world and it's not going away, So
Speaker 1: I think.
Speaker 4: That's sort of the way to think about it.
Speaker 2: You've spoken about your optimism around tether as well.
Speaker 3: I'm curious about your.
Speaker 2: View on this, because recently S and P analysts have
Speaker 2: said if the latest US stable coin built passes that
Speaker 2: US companies would no longer be able to hold or
Speaker 2: transact in Tether because it's run by a non US entergy.
Speaker 2: How do you prepare for something like that?
Speaker 1: Well, I think, first off, Americans stable coins in general,
Speaker 1: there's two big ones. There's tether and there's Circle, okay,
Speaker 1: and Americans should have nothing to do with these things.
Speaker 1: I have dollars in my pocket, I have dollars in
Speaker 1: my bank account, I have a credit card and dollars.
Speaker 1: I can venmo, you PayPal, zell. These are all simple
Speaker 1: things for Americans. We have no business being near stable coins.
Speaker 1: But I'll tell you what Argentina, Turkey, Venezuela. If our
Speaker 1: money right, if our bank account we woke up with
Speaker 1: the uh, you know, the Turkish lira, which was down
Speaker 1: sixty five percent last year, we'd be doomed. So you
Speaker 1: want to hold the digital dollar. So that's where tether
Speaker 1: really flourishes. It's in the emerging markets. So the concept
Speaker 1: of trading stable coins in America, I.
Speaker 4: Just don't get it. So I don't think it has
Speaker 4: anything to do with America.
Speaker 1: I think what we care about as Americans is that
Speaker 1: the dollar is all powerful in the world.
Speaker 2: Do you worry, ever, that there could be the use
Speaker 2: of bitcoin or tether being used to evade US sanctions
Speaker 2: Given the use of it around the world, particularly coming
Speaker 2: out of Russia.
Speaker 1: I think the key to digital is that it's always digital.
Speaker 1: You know, dollars, you remember when we went into Iraq,
Speaker 1: they found like rooms of four billion dollars on pallets
Speaker 1: that you can't trace, but digital money you can trace.
Speaker 1: I think the firms like Circle and Tether have to
Speaker 1: work deeply closely with law enforcement and grab it because
Speaker 1: remember these are digital money. All they can do is
Speaker 1: move around, and the blockchain always keeps track. So think
Speaker 1: of the AI and think of the tools the government's
Speaker 1: going to have.
Speaker 4: They are going to get better and better.
Speaker 1: The way I describe it is government moves reasonably slowly,
Speaker 1: but it always gets there, sooner or later we'll get there.
Speaker 1: So they'll have great AI tools. They're going to use
Speaker 1: their AI tools. Any criminal that he wants to use
Speaker 1: Circle or Tether is going to get caught. It's going
Speaker 1: to get seized because it's digitals. I mean, you can't
Speaker 1: really hide it. It's on the blockchain. You can follow
Speaker 1: it from here to here to here to here. So
Speaker 1: I think it's good for news to say, oh, they're
Speaker 1: using it like this and this, but they're all going
Speaker 1: to get caught. They're all working Tether and Circle are
Speaker 1: working closely with law enforcement, and these crooks are just
Speaker 1: it's so much worse than a regular dollar, at least
Speaker 1: a dollar in their pocket they can hide.
Speaker 4: How can they hide a digital dollar? That's a joke.
Speaker 3: Howard.
Speaker 2: We thank you so very much for breaking your big
Speaker 2: news with us. Congratulations on getting this venue off the ground,
Speaker 2: and for all of your candor that is Canter Fitzgeraldchure
Speaker 2: and CEO Howard Lennox