ELX Markets

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ELX Markets
Founded 2007
Headquarters New York, NY
Key People Richard Jaycobs, CEO
Products U.S. Treasury Futures, Eurodollar futures
Website www.elxmarkets.com

ELX Markets, formerly ELX Futures, L.P. (ELX Futures), is a fully-electronic futures exchange founded in 2007 and launched in 2009 offering trading of interest rate futures. It is backed by the brokerage firm BGC Partners Inc. along with a consortium of major global investment banks and market makers.[1][2][3]

Veteran futures industry executive Richard Jaycobs succeeded Neal Wolkoff as chief executive officer of ELX in January of 2012.[4]

Soon after beginning his chairmanship, Jaycobs said in a media interview that ELX was seeking partners for a structure that would rely less on dealers and more on fund managers and other end-users for business.[5]

ELX ranked number 39 in 2010 in the Futures Industry Association's (FIA) global list of top 53 derivatives exchanges measured by volume, moving up two positions from the previous year, and increasing total volume by 162.6 percent from the previous year.[6]

Clearing services for ELX are provided by the Options Clearing Corporation (OCC).

Products

ELX Markets offers trading on U.S. Treasury futures, including 2-Year Note Futures, 5-Year Note Futures, 10-Year Note Futures, 30-Year Bond Futures, and Ultra Long Term bond futures. They also offer trading on Eurodollar futures.

Strategies available in Eurodollar futures include associated calendar spreads, Packs and 2-year Bundles.

Total volume at the exchange for the first three quarters of 2011 surpassed 15 million contracts as trading activity for the exchange's 30-year and Ultra-Long U.S. Treasury bond futures contracts set new quarterly records. The 30-year bond volume in the third quarter exceeded one million contracts for the first time, with 1,167,171 contracts traded, surpassing the second quarter 2011 record of 964,534 contracts and bringing the total traded since launch to nearly 5 million. The average daily volume for the quarter was a record 18,237 contracts, with market share during the quarter rising to a record 4.3 percent.[7]

On Nov. 16, 2011, ELX Markets announced plans to reduce the minimum tick size in the outright months of its 10-year U.S. Treasury note futures contract to one quarter of one thirty-second of one point ($7.8125 per contract) beginning on the evening of Dec. 4, for the trading date Dec. 5.[8]

ELX Markets announced plans on May 1, 2012 to launch a slate of agricultural contracts that would compete directly with the agricultural products offered by the CME Group Inc, who dominate U.S. trading in grains. [9]

Background

The venture was first announced on Dec. 21, 2007. The Commodity Futures Trading Commission (CFTC) approved ELX's application to become a Designated Contract Market (DCM) on May 27, 2009.[10]

ELX Markets began trading U.S. Treasury futures contracts July 10, 2009, trading more than 18,000 contracts.[11]

The exchange was built on BGC PartnerseSpeed electronic trading platform. Previous users of the eSpeed application had direct access to futures trading on ELX. Clearing services for ELX are provided by the Options Clearing Corporation (OCC).[12]

Some media reports called the exchange a challenge to the pre-eminence of the CME Group because it aims to compete against one of CME's premier products in offering futures on U.S. Treasuries.[13]

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.[14] Realtime Systems Group (RTS) was announced as ELX's first ISV partner.[15] On July 7, 2009, ELX Markets announced a partnership with MF Global Ltd, which will become an exchange Participant and offer FCM services.[16]

ELX signed an agreement in July of 2008 to have the National Futures Association provide market surveillance and oversight.[17][18]

ELX Markets handled over 17,000 contracts on its first day, challenging incumbent CME Group Inc. in the trading of Treasury futures.[19]

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.[20]

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.[21]

ELX Markets 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.[22]

In late July 2010, the exchange announced that beginning Aug. 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. [23] ELX previously charged 35 cents per contract to traders who bought or sold less than 1,200 contracts a day. [24]

On Nov. 1, 2010, ELX announced open interest for Eurodollar futures hit an all-time high of 110,855 contracts in October and contracts traded hit a new high of 20,227 on Oct. 26.[25]

On Dec. 2, 2010, ELX announced new records for open interest and volume in the Eurodollar futures contract. Open interest surged almost 80 percent since October to hit 198,000 contracts on Dec. 1. Volume also increased 38 percent from it's previous record on Nov. 30 with over 56,000 contracts traded. [26]

History

"ELX Markets" 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.[27] and Goldman Sachs, who ELX announced on June 1, 2009 would join as a founding partner.[28]

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. [29]

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.[30]

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.[31]

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.

On Dec. 15, 2010, ELX announced that Advantage Futures LLC, a technology-focused futures brokerage firm, would become an authorized Participant and offer Futures Commission Merchant services for ELX. [32]

ELX Futures, L.P. officially changed its name to ELX Markets in January 2014.[33]

People

Connecting ISVs

ISVs that connect to ELX include: BCG Partners, Broadway Technology, CQG, FFastFill, First Derivatives, Ion Trading, Onixs, Orc Software, Progress Opama, RTS Realtime Systems, Stellar, SunGard, ULLINK and 741 Studios[34]

Authorized Futures Commission Merchants

Resources

References

  1. ELX. exchange-handbook.co.uk.
  2. Press Release. ELX Futures.
  3. Press Release. ELX Futures.
  4. Press Release. FinanzNachrichten.de.
  5. Wall Street loosens ties with CME rival ELX. Chicago Tribune.
  6. 2010 Annual Volume Survey. Futures Industry.org.
  7. Press Release. ELX Futures.
  8. ELX to Narrow Ticks to Quarter Intervals in 10-Year Treasury Contract. MarketWatch.
  9. ELX Plans Agricultural Futures in Challenge to CME. Dow Jones Newswires.
  10. ELX FUTURES RECEIVES CFTC APPROVAL TO BECOME A DESIGNATED CONTRACT MARKET. ELX.
  11. Modest volume as upstart ELX Markets mart debuts. Reuters.
  12. Our Company. ELX Futures, L.P..
  13. CME rival ELX set to launch, but bad blood could mar debut. Crain's Chicago Business.
  14. Press Release. ELX Futures.
  15. Press Release. ELX.
  16. MF Global Partners With ELX Markets To Provide Clients Greater Access To Fixed Income Market. Mondovisione.
  17. CME rival ELX contracts for oversight. The Chicago Tribune.
  18. Press Release. ELX Futures.
  19. CME rival’s first day a success, says ELX CEO. Chicago Business/Crain's.
  20. ELX Futures Voice Objections To NYSE-DTCC Partnership. Nasdaq.
  21. CME, Rival ELX Vie for Volume on Longest End of Yield Curve. The Wall Street Journal.
  22. ELX Futures To Launch Eurodollar Futures Contract on June 18, 2010. ELX website.
  23. Press Release. ELX.
  24. ELX Futures Drops Trading Minimum on Eurodollar Fees. Bloomberg.
  25. ELX Reports Open Interest and Volume Records in Eurodollar Futures. MarketWire.
  26. ELX Starts Month of December with Record Volume and OI. ELX website.
  27. Press Release. ELX Futures.
  28. Goldman Joins Startup Exchange ELX. Crain's Chicago Business.
  29. Citadel Drops ELX Board Seat; Will Remain User. Morningstar.
  30. CME relaxed about relations with Wall St. Financial Times.
  31. Opponents of all-Chicago deal find case has backfired. Financial Times.
  32. Advantage Futures Partners with ELX to Offer FCM Services. Marketwire.
  33. John Lothian Newsletter: Deutsche Boerse Looks to Asia, Calls on Europe to Be Competitive; Trading on combined BATS-Direct Edge set for February; Position limits on electricity trade lifted. John Lothian News.
  34. ISV Program. ELX.