NYSE Futures Market Sees Clearing Function For Customers This Year

The U.S. futures arm of NYSE Euronext (NYX) intends to extend a more efficient model of trade processing to exchange customers within the year, according to an executive leading the effort.

The Big Board parent's push into U.S. interest-rate futures trading is based on a joint venture with the Depository Trust and Clearing Corp. that lets clearinghouse members group futures and cash Treasurys collateral in one place.

Investor customers of clearinghouse members will get similar benefits later in 2011, once certain operational hurdles are surpassed, said Tom Callahan, chief executive of the NYSE Liffe U.S. derivatives market.

"We hear from customers all the time, capital efficiency is as important if not more important than to a global bank," said Callahan, speaking Wednesday at a conference held by the Futures Industry Association.

New York Portfolio Clearing, the clearinghouse facility that will support NYSE Liffe U.S.'s fixed-income futures roster, gained approval from U.S. market regulators in recent weeks and initial contracts will begin trading Monday, following a nearly two-year development period.

The move puts NYSE Euronext up against the main business of Chicago-based CME Group Inc. (CME), which has faced down past threats from competitors including Cantor Futures, Brokertec and a U.S.-based venture by German derivatives exchange operator Eurex.

Extending the collateral management functions to exchange customers comes as NYSE Liffe U.S. aims to broaden its product range from an early list of futures linked to Treasurys and key inter-bank lending rates. Options on futures contracts are likely to come online in the third quarter of 2011, Callahan said.

The exchange will charge six cents per trade side; each trade has both a buy and sell side. The offering is competitive, but "nobody's ever stolen away market share on fees alone," said Walter Lukken, a former acting chairman of the Commodity Futures Trading Commission who is leading the clearinghouse joint venture.

An initial slate of clearinghouse members in New York Portfolio Clearing was announced Wednesday, including banks like Barclays Capital PLC and Morgan Stanley (MS), futures brokers like Newedge and Rosenthal Collins Group, and electronic trading specialists like Getco LLC and Ronin Capital. Additional banks are in the process of signing on, according to the company.

-By Jacob Bunge, Dow Jones Newswires; 312-307-4879; jacob.bunge@dowjones.com

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