NLX hails buy-side presence as it celebrates first year

Encouraging the buy-side to trade is the biggest hurdle that Nasdaq OMX NLX has faced over the first year of its life, according to CEO Charlotte Crosswell.

Encouraging the buy-side to trade is the biggest hurdle that Nasdaq OMX NLX has faced over the first year of its life, according to CEO Charlotte Crosswell.

The London-based derivatives exchange, which launched on 31 May 2013, said it has reached a key volume-based milestone for attracting buy-side traders in its first year and is planning new product launches in the near future.

“Drawing in the buy-side has been by far the biggest challenge of the past year. Having the right liquidity is vital for them and it has been hard work to build up that credibility and volume,” Crosswell told

Building up volumes of trading in three-month Euribor contracts has been a major focus for NLX and its latest 30-day average for the product now represents just short of 15% of total market share and is now seeing significant interest from institutional investors.

Crosswell added: “Getting market share to where you want is always a challenge. You need to be at about 5% before people begin to take an interest in you and 10% in order to start attracting the buy-side interest.”

In particular, the exchange needed three months of data showing consistent volume before institutions became interested in trading.

Last year, NLX said it would initially focus on short-term interest rate products, though growth in its three-month sterling and two-year Schatz contracts has been lower, with market share of both sitting at between 3-4%. According to NLX, volumes are growing steadily.

Crosswell said NLX is now gearing up for new product launches in its second year of operation, though it will continue to be fairly focused, with just a select few products that clients demand.

Options on its futures contracts are set to launch in the summer due to client requests, as the exchange now has sufficient liquidity to make options attractive.

OTC products are also being looked at and swap futures are among the products NLX is currently evaluating, though any launch would be highly dependent on client feedback.

Crosswell also said that, in the coming weeks, “We are retendering for market makers to further improve the quality of our order book and increase depth of the market, which clients look for.”

It is hoped this retendering for market makers at a time of greater macro-economic stability in Europe will also help boost trading in Schatz and sterling products to reach the important 10% point. With the Bank of England expected to raise interest rates in the near future, sterling products could be the next to see significant market share on NLX as more investors look to trade sterling contracts.

NLX is directly competing with established exchanges Liffe, which was bought by US-based Intercontinental Exchange last year, and Duetsche Börse-owned Eurex. It is the first new derivatives exchange to challenge the two dominant players, hoping to capitalise on reform of the derivatives market as part of the European market infrastructure regulation.

In particular, its clearing arrangement with interoperable central counterparty LCH.Clearnet has been touted as a major advantage over the closed clearing arrangements offered by Eurex and Liffe.

CME also launched a European exchange earlier this month, offering a range of currency and commodity derivatives, and Global Markets Exchange, founded by former Chi-X Europe COO Hirander Misra, is also seeking regulatory approval to launch an exchange to trade an swap future product it has developed.