ELX Futures, L.P.

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ELX Futures, L.P.
Image:ELX.png
Founded 2007
Headquarters New York, NY
Key People Neal Wolkoff, CEO
Web site www.elxfutures.com

ELX Futures, L.P. (ELX Futures) is a fully-electronic futures exchange founded in 2007 and launched in 2009. It is backed by a consortium of founding partners comprising leading global investment banks and market making firms.[1][2][3]

ELX ranked number 41 in 2009 in the Futures Industry Association's (FIA) global list of top 53 derivatives exchanges measured by volume, with just over five million trades recorded figure.[4]

Background

The venture was first announced on Dec. 21, 2007 and the Commodity Futures Trading Commission (CFTC) approved ELX's application to become a Designated Contract Market (DCM) on May 27, 2009.[5]

ELX Futures began trading U.S. Treasury futures contracts July 10, 2009, trading more than 18,000 contracts.[6]

The exchange was built on BGC Partners’ eSpeed electronic trading platform. Current users of the eSpeed application will have direct access to futures trading on ELX. Clearing services for ELX will be provided by the Options Clearing Corporation (OCC).[7]

The financial press have called the exchange a challenge to the pre-eminence of the CME Group because it is directly competing against one of CME's premier products in offering futures on U.S. Treasuries.[8]

In March of 2008, ELX announced it had launched an independent software vendor (ISV) program to support access to the exchange by a wide range of market participants.[9] Realtime Systems Group (RTS) was announced as ELX's first ISV partner.[10] On July 7, 2009, ELX Futures announced a partnership with MF Global Ltd, which will become an exchange Participant and offer FCM services.[11]

In July of 2008, ELX announced it had signed an agreement to have the National Futures Association provide market surveillance and oversight.[12][13]

ELX Futures handled over 17,000 contracts on its first day, challenging incumbent CME Group Inc. in the trading of Treasury futures.[14]

In fall of 2009, Dow Jones Newswires said ELX chief executive Neal Wolkoff said in an interview that ELX executives contended that a partnership between NYSE Euronext and the Depository Trust and Clearing Corp. was unfairly excluding competitors.[15]

On Jan. 11, 2010, ELX launched trading in ultra-long interest-rate bonds. The new ultra bond futures require deliveries of maturities 25 years and longer, meaning that the new contract will more closely track the price of longer bonds. The contracts compete with similar contracts launched by the CME Group at the same time.[16]

ELX futures announced on April 19 that it would launch a Eurodollar Futures contract on June 18, 2010, which will join the suite of U.S. Treasury Futures products already trading at the exchange.[17]

In late July 2010, the exchange announced that beginning August 1, it will charge all users one-tier, 18 cents per trade eurodollar trading and clearing fees, eliminating the minimum daily trading requirements for fee-discount eligibility. [18] ELX previously charged 35 cents per contract to traders who bought or sold less than 1,200 contracts a day. [19]


History

"ELX Futures" is the formal and most recent name for the exchange; it had several previous working and informal titles, including Four Seasons, the ESX and the Electronic Liquidity Exchange. The founding partners include Bank of America-Merrill Lynch, Breakwater, Citigroup, JP Morgan Chase,BCG Partners Inc., Deutsche Bank A.G., Barclays PLC, Credit Suisse Group, Getco, Peak6, Royal Bank of Scotland PLC.[20] and Goldman Sachs, who ELX announced on June 1, 2009 would join as a founding partner.[21]

On Oct. 29, 2008, Citadel, a founding partner, said it would pull its board member from ELX, according to a source close to the matter. Citadel said it would retain an equity stake and would use the still-to-be launched ELX platform, which aimed to challenge the CME's dominance in Treasury futures. However, the firm planned to focus on the credit-default swap trading and clearing platform being developed with CME. [22]

The backers of ELX have steered clear on identifying the CME Group as a direct competitor, though efforts to start a lower-cost platform highlight the concerns expressed by users during the CME’s takeover battle for the Chicago Board of Trade. Banks, mindful of CME Group’s push into the OTC market, suggested the enlarged CME would have monopoly pricing power, a charge denied by the CME.[23]

The absence of such pricing power and the potential for market entry were cited by the U.S. Department of Justice in its approval for the CME-CBOT merger.[24]

The new exchange marks the latest effort to challenge the Chicago exchange complex, following unsuccessful efforts by Cantor Exchange - a joint venture between the New York Board of Trade and eSpeed’s owner, specialist trading group Cantor Fitzgerald in 1999 - BrokerTec Futures Exchange in 2001 and Eurex US in 2004. The latter has since been restructured as the US Futures Exchange.

People

Neal Wolkoff was named CEO of the ELX on Oct. 6, 2008.[25]

Connecting ISVs

ISVs that connect to ELX include: BCG Partners, Broadway Technology, CQG, FFastFill, First Derivatives, Inforalgo Infomation Technologies, Orc Software, Progress Opama, RTS Realtime Systems, Trading Screen, and ULLINK[26]

References

  1. ↑ ELX. exchange-handbook.co.uk. Retrieved on June 18, 2009.
  2. ↑ Press Release. ELX Futures. Retrieved on April 29, 2009.
  3. ↑ Press Release. ELX Futures. Retrieved on April 29, 2009.
  4. ↑ 2009 Annual Volume Survey. FIA magazine. Retrieved on April 8, 2010.
  5. ↑ ELX FUTURES RECEIVES CFTC APPROVAL TO BECOME A DESIGNATED CONTRACT MARKET. ELX. Retrieved on May 27, 2009.
  6. ↑ Modest volume as upstart ELX Futures mart debuts. Reuters. Retrieved on July 13, 2009.
  7. ↑ Our Company. ELX Futures, L.P.. Retrieved on May 27, 2009.
  8. ↑ CME rival ELX set to launch, but bad blood could mar debut. Crain's Chicago Business. Retrieved on May 27, 2009.
  9. ↑ Press Release. ELX Futures. Retrieved on April 29, 2009.
  10. ↑ Press Release. ELX. Retrieved on April 29, 2009.
  11. ↑ MF Global Partners With ELX Futures To Provide Clients Greater Access To Fixed Income Market. Mondovisione. Retrieved on July 7, 2009.
  12. ↑ CME rival ELX contracts for oversight. The Chicago Tribune. Retrieved on July 22, 2008.
  13. ↑ Press Release. ELX Futures. Retrieved on April 29, 2009.
  14. ↑ CME rival’s first day a success, says ELX CEO. Chicago Business/Crain's. Retrieved on July 14, 2009.
  15. ↑ ELX Futures Voice Objections To NYSE-DTCC Partnership. Nasdaq. Retrieved on October 9, 2009.
  16. ↑ CME, Rival ELX Vie for Volume on Longest End of Yield Curve. The Wall Street Journal. Retrieved on January 11, 2010.
  17. ↑ ELX Futures To Launch Eurodollar Futures Contract on June 18, 2010. ELX website. Retrieved on April 19, 2009.
  18. ↑ Press Release. ELX. Retrieved on August 3, 2010.
  19. ↑ ELX Futures Drops Trading Minimum on Eurodollar Fees. Bloomberg. Retrieved on August 3, 2010.
  20. ↑ Press Release. ELX Futures. Retrieved on April 29, 2009.
  21. ↑ Goldman Joins Startup Exchange ELX. Crain's Chicago Business. Retrieved on June 1, 2009.
  22. ↑ Citadel Drops ELX Board Seat; Will Remain User. Morningstar. Retrieved on October 29, 2008.
  23. ↑ CME relaxed about relations with Wall St. Financial Times. Retrieved on January 18, 2008.
  24. ↑ Opponents of all-Chicago deal find case has backfired. Financial Times. Retrieved on January 18, 2008.
  25. ↑ Press Release. ELX Futures. Retrieved on April 29, 2009.
  26. ↑ ISV Program. ELX. Retrieved on May 27, 2009.
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