UPDATE: CME Challenger ELX Futures Sets July 10 Launch Date
June 18 2009 - 10:41AM
Dow Jones News
ELX Futures LP will begin trading July 10 as the new derivatives
exchange aims to bring competition to the Treasury futures
market.
After 18 months of planning and development, ELX will deliver on
a pledge to offer an alternative to Chicago-based CME Group Inc.
(CME), the derivatives giant that dominates Treasury futures
trade.
"This is a significant milestone for everyone involved in ELX
Futures," said Neal Wolkoff, the former American Stock Exchange
chief executive who signed on to head ELX last autumn. "We plan to
compete aggressively and offer our customers the best in service,
technology and fees."
The exchange was cleared to begin operations by the Commodity
Futures Trading Commission on May 27. Trades will be cleared
through the Options Clearing Corp.
ELX is supported by a consortium of banks, technology companies
and proprietary trading firms, with the intention of offering a
cheaper and faster means of trading Treasury futures, a market in
which CME operates a near-monopoly.
ELX's fee for high-volume traders is a flat nine cents per trade
side, which includes clearing. Adding together CME's clearing and
trading fees, its lowest rate is 11 cents per trade side in
Treasury futures, following a fee shake-up earlier this week.
A CME spokesman had no immediate comment.
Wolkoff said that other "major asset classes" will be added to
the ELX platform; in the past, he suggested European government
bonds as a possible area of expansion.
ELX's entry into Treasury futures comes as trading volume for
CME's interest rate product line recovers from massive deleveraging
by key market players as a result of the credit crunch.
Debate whether the Federal Reserve will lift its short-term
fed-funds rate has benefited volume in short-term Treasury
contracts, and if trends continue from the past couple of weeks,
June will likely mark the second consecutive month of double-digit
volume growth compared to the previous month, according to a
research note from Raymond James.
CME said its volume in May for Treasury futures and options was
62% higher than April, but down 36% from May 2008.
ELX's Wolkoff has set no hard target for market share, but he
has emphasized that the all-electronic ELX, operating a streamlined
operation, doesn't need exceedingly high volumes to be
successful.
The group backing ELX includes Citigroup Inc. (C), Deutsche Bank
(DB), Merrill Lynch & Co. and its acquirer Bank of America
Corp. (BAC), Barclays PLC (BCS) unit Barclays Capital, Credit
Suisse Group (CS), BGC Partners Inc. (BGCP), Getco, JPMorgan Chase
& Co. (JPM), Peak6, and Royal Bank of Scotland PLC (RBS).
Citadel Investment Group, the Chicago-based hedge fund operator,
also was a founding member of ELX but gave up its board seat when
it joined CME in developing a credit derivatives clearing and
trading platform.
Citadel maintains its equity stake in ELX.
-By Jacob Bunge, Dow Jones Newswires; (312) 750 4117;
jacob.bunge@dowjones.com
(Howard Packowitz contributed to this report.)