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Nasdaq NLX says 10 percent market share in key contract shows momentum growing

A security officer stands guard outside the Nasdaq MarketSite in New York's Times Square, August 23, 2013. REUTERS/Andrew Kelly
A security officer stands guard outside the Nasdaq MarketSite in New York's Times Square, August 23, 2013. REUTERS/Andrew Kelly

By Clare Hutchison

LONDON (Reuters) - Nasdaq OMX's new London-based derivatives exchange has achieved 10 percent market share in one of its contracts, a level of liquidity that will draw more market participants to connect, its chief executive said.

The nine-month old NLX exchange allows trading in a range of short- and long-term interest rate, euro and sterling-denominated derivative products on a single market. Clients can both trade and settle orders through the NLX platform.

It launched amid a drive by global regulators to push derivatives, which include commodities and other financial instruments, on to exchanges to improve transparency and lower risk. Derivatives have mainly been traded over the counter between banks and trading houses.

NLX's fees are lower than rivals - Deutsche Boerse's Eurex, Europe's largest derivatives exchange which dominates long-term interest rate derivatives, and IntercontinentalExchange-owned NYSE Liffe , the second-largest and leader in shorter contracts.

Data compiled by NLX shows it has a 30-day moving average market share of 10 percent in Euribor, the world's second-largest short-term interest rate contract after Eurodollar, a level CEO Charlotte Crosswell said was psychologically important to prospective clients.

"Ten percent market share is a significant number. Because we are regularly doing that in one of the products that has impact ... that's why people are connecting, but then they will also support the whole rates curve," Crosswell told Reuters in an interview at Nasdaq's London office.

The number of clients on its roster has now risen from 16 to 27. These clients represent approximately 60 to 70 percent of the trading volume in the listed European rates contracts NLX offers, she said.

Its share of longer-term contracts, which include German government bond futures and long Gilt futures, remains at 2 to 3 percent and its overall market share across all products at 3 percent on a 30 day moving average, Crosswell said.

That's behind the 10 percent level Nasdaq OMX CEO Robert Greifeld has said he would class as success, but Crosswell said she was pleased with the new exchange's performance so far, given that its first year clashed with the introduction of new rules on swaps trading as part of the U.S. Dodd Frank Act.

"The timing was very tough. It's always been a challenge to compete for (banks' and trading services firms') tech resources. If that wasn't the case we may have even more people connected.

"All in all we're pretty happy with where we are. There's a pretty huge amount of work left to go and we don't underestimate that," she said.

The 41-year-old mother of one responded to market criticism of the incentives NLX offers to encourage participants to trade on the market. NLX gives cash in exchange for the number of trades executed, instead of the revenue-based rebates or stipends some incumbents pay out for certain products.

"I do get a little frustrated when people criticize it ... it would be foolish to take those away when we're still developing the market and we still have to get to a sustainable level," she said.

The former Goldman Sachs banker, a prominent advocate for women in finance who has lobbied the government on childcare issues, said there would be no change in NLX's strategy in its second year, with the focus remaining on building market share.

The exchange will also launch options contracts and is looking into new products made more attractive by regulations on derivatives including swap futures, she said.

(Editing by Mark Potter)

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