Product Innovation, Clearing, and Competition among U.S. Derivatives Exchanges, 1 J. Marshall Global Mkt. L.J. 3 (2012)

Futures traders are attracted to market liquidity—the ability to buy and sell without the transaction having a large impact on market price. Market liquidity is associated with a large number of buyers and sellers and high average daily volumes of trading. This Article discusses the reluctance of futures traders to switch to a new exchange which does not have as much liquidity as an older, established exchange and the difficulty that these new exchanges face in acquiring even a marginal portion of the market share. These difficulties arise because these exchanges choose to use a clearing house that they own or control and they do not list fungible products that can be offset at other exchanges. The Article further suggests that this strategy protects the established exchanges from competition from new exchanges