CORRECT: Volume On ELX Futures Nearly 20,000 On First Day
July 10 2009 - 9:38PM
Dow Jones News
ELX Futures traded nearly 20,000 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 1.6% 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 9,900
September-dated 10-year Treasury futures, its most actively traded
product, change hands.
Trading volume in September five-year Treasury futures was about
5,000 contracts, 2,900 in 30-year bond futures, and 1,850 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. But ELX's day-one business was
less than 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