NYSE Euronext Plans New Contracts In Futures Challenge To CME
January 04 2012 - 3:28PM
Dow Jones News
The fledgling U.S. futures market run by NYSE Euronext (NYX)
announced Wednesday it would launch a new sort of interest-rate
futures contract in the coming months as the Big Board parent ramps
up competition with CME Group Inc. (CME), the dominant player in
domestic futures trade.
NYSE Liffe U.S. is pressing ahead against much-larger CME,
planning to introduce additional metals and stock-index derivatives
markets and broaden its trading services throughout 2012, according
to Thomas Callahan, chief executive of the venture.
"We're certainly proving ourselves," said Callahan in an
interview.
The parent of the New York Stock Exchange launched the U.S.
counterpart to its London-based Liffe derivatives market in 2008,
initially offering a small slate of contracts linked to precious
metals and equity indexes run by MSCI Inc. (MSCI).
The effort stepped up in March 2011 when NYSE Liffe US rolled
out a slate of interest-rate futures modeled on CME's core markets
and supported by a new clearinghouse developed with the Depository
Trust & Clearing Corp. That opened a three-way battle for U.S.
rate futures trade that also includes ELX Futures LP, a
bank-supported platform launched in 2009.
Since then NYSE Euronext's market share in benchmark CME
contracts like Eurodollar and Treasury futures has ranged between
1% and 3%, occasionally rising as high as 4.5%, according to data
compiled by Raymond James Financial (RJF). CME last year traded an
average 6 million interest rate futures contracts each day, a
market used by banks and hedge funds to hedge against anticipated
changes in the tone of credit markets.
Duncan Niederauer, chief executive of NYSE Euronext, said in
2010 that the effort would need daily trading volume of a few
hundred thousand contracts and a similar level of open trading
positions to be taken seriously.
Callahan said that by late 2011 NYSE Liffe US was averaging
about 100,000 contracts per day, with more than 200,000 contracts
changing hands per day during some trading sessions. Open
interest--the number of contracts that are outstanding on an
exchange's market--surpassed one million contracts in
mid-December.
In mid-2012 NYSE Liffe US intends to launch options on
Eurodollar futures, which project movements in the London interbank
offered rate, Callahan said. A plan is underway to allow customers
access to the New York Portfolio Clearing facility, which would
expand trading-collateral services now available only to
clearinghouse member firms.
New futures on metals and MSCI stock-market measures are also in
the works, he said.
The new contracts announced Wednesday by the firm are linked to
the $400 billion daily market in repurchase deals that help banks
finance trading in Treasury bonds and are planned to list early
this year on NYSE Liffe US. The so-called DTCC General Collateral
Finance Repo Index futures will track the average interest rate
paid daily for "general collateral" repurchase agreements that
involve U.S. Treasury, agency and agency mortgage-backed
securities.
Callahan said the contracts could serve as a new benchmark for
short-term funding rates. "At a time when the balance sheets of all
banks are [under pressure], having this type of product will be
helpful for banks to finance their inventories everyday," he
said.
-By Jacob Bunge, Dow Jones Newswires; 312 750 4117;
jacob.bunge@dowjones.com
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