A Future With Options
With derivatives exchanges in Europe and now in the U.S., NYSE Euronext diversifies its global offerings.
Getty Images: Type, Julia Michry
Print
E-mailNYSE Euronext is expanding its global futures and options business with the launch of new derivatives markets in the U.S. Based in Europe, NYSE Liffe is the world’s second largest derivatives business by transaction value, trading more than 4 million contracts per day for customers in 31 countries. Last year NYSE Euronext (NYX) launched NYSE Liffe U.S. after the Exchange purchased the CBOT precious-metals complex (gold and silver contracts) from CME Group and gained a second U.S. options market through its American Stock Exchange acquisition, which complemented its NYSE Arca Options trading platform.
“NYSE Liffe, NYSE Liffe U.S. and our dual options-market structure in the U.S. strategically enhance our position as the world’s foremost multiasset global exchange group,”explains NYSE Liffe Chairman Hugh Freedberg. “Through our internationally distributed best-in-class technology, diverse product range and innovative development efforts, we will provide our global customers and investors with exceptional service and market quality.”
Record derivatives-trading volumes highlight the market growth: NYSE Liffe in Europe, where futures and options trade on the same platform, executed more than a billion contracts in 2008, up 11 percent from 2007. In the U.S., where the options and futures markets are regulated by the SEC and the CFTC, respectively, and therefore trade on separate platforms, total options volume was up 37 percent, outpacing the U.S. options industry.
Following its September launch, NYSE Liffe U.S. captured roughly 10 percent of the precious-metals market in North America in its first two weeks and traded more than 1.8 million metals contracts for the year. This year, through March, it’s averaging 25,000 contracts daily.
A Gold and Silver Foothold
The CME dominates the U.S. futures business, but last year NYSE Euronext acquired the precious-metals complex of CBOT and gained a foothold in the business. NYSE Liffe U.S. CEO Tom Callahan explains that NYSE Liffe U.S. will compete with the CME by offering an alternative venue for related products and by creating new products beyond gold and silver futures. He points to demand for new competitors following the almost complete consolidation of the listed futures business during the past five years.
“It’s stunning when you look at it; three vibrant U.S. futures exchanges have merged into one,”Callahan says. “So there’s a great opportunity in the U.S. to leverage our NYSE Liffe business and LIFFE CONNECT,® a state-of-the-art trading platform that is widely viewed as among the world’s best and most efficient.”
By the end of the first quarter, NYSE Liffe U.S. anticipates that it will have upgraded all of its technology and data centers and transitioned clearing from CME to the Options Clearing Corp. “We’ve got a very mature, fast and scalable platform upon which we can start launching a lot of different products,”Callahan says. “It’s been a good time to be in the metals business, but we have even broader ambitions.”
Another reason to expect growth: The credit crisis has exposed the dangers of counterparty risk in the over-the-counter (OTC) derivatives markets, Callahan explains, so more market participants are looking to listed derivatives for solutions that are regulated and transparent.
