ELX Lays Out One-Cent Challenge To CME On Eurodollars

Startup exchange ELX Futures LP on Monday detailed fees for its planned Eurodollar futures contracts, aiming to undercut fees charged at much-larger rival CME Group Inc. (CME) by one cent.

Combined charges for trading and clearing Eurodollar contracts at ELX will begin at 18 cents per contract for the most active traders, according to a notice from the company.

CME's fees for electronic trading of Eurodollar futures start at 10 cents per contract, with nine cents in clearing fees, though charges can come down for those trading more than 30,000 contracts per day.

ELX aims to launch its version of Eurodollar futures, tied to anticipated shifts in the London interbank offered rate, on June 18 as the upstart targets another of CME's core interest-rate derivatives markets.

Backed by a group of Wall Street banks, ELX made its debut last summer with a roster of Treasury-linked futures contracts, touting cheaper trading costs than CME, which continues to dominate the market in Treasury futures and other interest rate-linked derivatives markets. ELX in April captured 2.8% of trades in the Treasury futures market.

Following the Eurodollar fee announcement from ELX, traders will watch for movement out of CME. After ELX put out its charges for trading Treasury futures in June 2009, CME a week later expanded its menu of volume-based fee incentives, reducing the cost of trading Treasury futures for highly active users.

For Eurodollars at ELX, participants trading an average of more than 1,200 contracts per day will pay fees of 18 cents per contract. Those trading 1,200 contracts per day or fewer will pay 35 cents per contract.

Trading fees for interest-rate futures at CME range from 10 cents up to 55 cents depending on the type of market participant, alongside a spectrum of clearing charges that start at 9 cents per contract.

The fee schedule at ELX will provide "a cost savings for most users," Chief Executive Neal Wolkoff said. The market operator plans to waive fees for the products until July 1.

Eurodollars are CME's most popular interest-rate futures product, and reflect the market's view of moves in the three-month U.S. dollar Libor, determining the cost of borrowing U.S. dollars in the London interbank market.

ELX also has plans to move into other corners of CME's interest-rate derivatives complex, including fed funds futures and options on interest-rate futures.

-By Jacob Bunge, Dow Jones Newswires; (312) 750-4117; jacob.bunge@dowjones.com

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