Volume On ELX Futures Nearly 40,000 On First Day Of Trading
July 10 2009 - 6:28PM
Dow Jones News
ELX Futures traded nearly 40,000 Treasury futures contracts on
its first day of business, a would-be opening shot against
Chicago-based derivatives giant CME Group Inc. (CME).
The figure addressed lingering doubts as to whether the new
electronic platform would draw any activity upon launch, with ELX's
total volume representing 3.2% of CME's Treasury derivatives
business, where about 1.23 million contracts traded electronically
over Friday's session.
In an interview, ELX Futures Chief Executive Neal Wolkoff said
first-day trading activity exceeded his expectations, with the
number of users "outstanding."
The upstart exchange, in development for a year and a half, is
backed by a consortium of banks, trading firms and technology
companies pushing a lower-cost alternative to CME, which maintains
an effective monopoly on Treasury futures.
CME executives have been dismissive of ELX, the latest in a
series of ventures aimed at loosening its hold on the market.
"We provide the most efficient markets for our global customers
who rely on our ability to provide liquidity backed by our proven
central counterparty clearing model," said Michael Shore, a CME
spokesman, on Friday.
Wolkoff said that much of ELX's opening-day business came from
its backers, which include Goldman Sachs (GS), 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).
ELX also saw some business from outside customers, Wolkoff said;
in recent weeks he has signed up futures commissions merchants
Newedge and MF Global (MF).
At the close of trading Friday, ELX saw about 20,000
September-dated 10-year Treasury futures, its most actively traded
product, change hands,
Trading volume in September five-year Treasury futures was about
10,000 contracts, 5,800 in 30-year bond futures, and 3,700 in
two-year notes.
More impressive than the volume, Wolkoff said, was the fact that
prices on ELX's Treasury futures generally marched in lockstep with
their counterparts on CME.
That shows market participants that ELX can provide the same
quality of trade execution as its much-larger competitor, according
to Wolkoff.
"Nobody would execute on an upstart market if they could get a
better price on an established market," he said.
ELX Futures' opening-day total tops previous CME challenger
BrokerTec, which reported about 9,600 contracts traded in its
inaugural session in December 2001; that was about 2.4% of total
Treasury futures volume on the Chicago Board of Trade for the same
session.
The Chicago Board of Trade merged with the Chicago Mercantile
Exchange to form CME Group in 2007.
ELX's day-one business was nearly equal to that of Eurex US, a
Treasurys-focused exchange launched by Frankfurt-based Deutsche
Boerse AG (DB1.XE) in February 2004.
Eurex US handled about 39,400 contracts in its debut session,
about 6% of corresponding Treasury futures volume on CBOT that
day.
Neither of the previous CME challengers succeeded in cracking
its lock on the market.
The BrokerTec platform was acquired by inter-dealer broker ICAP
plc in 2003.
Eurex US eventually was rebranded as the U.S. Futures Exchange
before MF Global, the largest shareholder in the venture, withdrew
its support in late 2008 and wound the venture down.
-By Jacob Bunge, Dow Jones Newswires; (312) 750 4117;
jacob.bunge@dowjones.com