ELX Futures, a US-based electronic futures exchange, plans to compete with the NYSE Liffe and Eurex derivatives markets by launching interest rate products using the maker-taker and taker-maker pricing models.
ELX says it will bring new technology, competitive pricing and market structure innovation to try and challenge the existing duopoly structure.
“ELX was created to challenge monopolies, high prices and a lack of effective innovation in the futures industry,” said Neal Wolkoff, CEO of ELX Futures. “Our expansion into Europe is another bold move by ELX to launch competitive pricing, establish an additional European presence, and bring innovation to the global futures marketplace.”
Wolkoff believes that pricing will be crucial in gaining market share in this market. “ELX will introduce the maker-taker and taker-maker pricing models to give liquidity providers incentives to trade,” he added.
BGC Partners, which provides its eSpeed technology platform to ELX Futures, has European technological infrastructure and connectivity in place that can be used by ELX to develop its plans and to focus on the launch of trading these new interest rate products.
The European derivatives market is currently dominated by NYSE Liffe, run by market operator NYSE Euronext, and Eurex, a joint venture between European venues Deutsche Börse and SIX Swiss Exchange. NYSE Euronext, which earned €797.244 million in derivatives revenues in 2010, and Deutsche Börse, which saw €858.7 million in revenues from its Eurex business in 2010, are currently in merger talks.
The derivatives market is seen as a crucial revenue stream to support this merger and that of the London Stock Exchange Group and TMX, the Canadian market operator. Xavier Rolet, CEO of the London Stock Exchange said that the through the deal “We will be able to support trading across every major asset class, and the geographic profile of our revenue will be a balanced mix between North America and Europe.”