New European listed derivatives platform Nasdaq OMX NLX will launch on Friday after the UK market regulator issued its approval, following delays related to regulatory testing of its clearing operations.
The platform will launch on Friday 31 May after receiving the all clear from the Financial Conduct Authority (FCA) and will offer short- and long-term interest rate products denominated in euro and sterling. Trades will be cleared by London Stock Exchange Group-owned clearing house LCH.Clearnet.
The platform will launch trading futures product in three-month Euribor, three-month sterling, long gilt, two-year Schatz, five-year Bobl and ten-year Bund instruments.
In March, the platform faced delays to the regulatory approval process when the UK regulator called for further testing of the Value-at-Risk model (VaR) used by LCH.Clearnet.
The Anglo-French clearing house uses VaR to calculate margin on its SwapClear global clearing service for interest rate swaps, but most listed futures exchanges use the SPAN methodology. NLX chose VaR margining specifically to align itself with the OTC instruments that are migrating to central clearing and exchange trading under the reforms to the derivatives market requested by the Group of 20.
“We have worked closely with the regulators in our application process and would like to thank them for their efforts and support to create this new market,” said Charlotte Crosswell, CEO of NLX. “NLX has collaborated with the market to develop a unique proposition that brings much needed competition to European interest rate derivatives.”
The NLX venue will attempt to carve out market share from the region’s dominant listed derivatives exchange, NYSE Liffe and Deutsche Börse-owned Eurex.
Although market volumes were lower in 2012 than 2011, both Liffe and Eurex maintained strong performance in interest rate derivatives, which accounted for 25% of Eurex’s derivatives volumes and 35-to-40% of NYSE Liffe’s, a report published earlier this year by consultancy Celent stated.
In a statement, LCH.Clearnet said the regulatory approval was a milestone and evidence that UK authorities sought an open and competitive market place for risk management solutions in Europe’s interest rate derivatives market.