ELX PLANS AGRICULTURAL FUTURES IN CHALLENGE TO CME -SOURCES
- ELX Futures LP plans to launch a slate of agricultural contracts, according to people familiar with the matter, in a move that would broaden its challenge to CME Group Inc. (CME), which dominates U.S. trade in futures linked to grains, energy and financials.
The New York-based exchange is seen introducing an all-electronic market for trading futures linked to the anticipated price of corn, wheat and other agricultural commodities, though the full offering and a launch date has yet to be finalized, the people said.
ELX's planned run at CME's dominance in grains follows a mid-April announcement from IntercontinentalExchange Inc. (ICE) that will see the Atlanta-based commodity market specialist introduce its own U.S. agricultural contracts beginning May 14, another direct challenge to CME.
ELX, backed by brokerage firm BGC Partners Inc. (BGCP) and a group of Wall Street firms, launched in mid-2009 with a slate of interest-rate futures contracts modeled on existing products at CME in an effort to loosen the Chicago-based market operator's grip on that business.
Running a much smaller operation than CME, ELX has sought to compete on price for business and introduce some new trading functions, but has captured just a fraction of the market. In March ELX traded 63,577 fixed-income futures, compared to 124.1 million futures and options contracts traded on the CME's markets.
A spokesman for CME Group had no immediate comment.
A spokeswoman for ICE declined comment. That exchange group runs soft commodity markets in New York and aims to build a franchise in Canadian wheat. Some grain market traders, however, have said they expected a tough road for ICE to draw business away from CME, the owner of Chicago-based exchanges that established modern futures trading in 1848.
Agricultural commodities represent an attractive target for rivals. Though smaller in terms of trading activity than markets linked to interest rates and stock indexes, agriculture is one of CME's more profitable markets and has been expanding at a time when overall volumes have declined.
ELX last month secured a fresh equity investment of $16 million from BGC Partners, among its key initial backers and the supplier of the exchange's trading technology. The investment from BGC boosted its equity interest in ELX to 56.7% and gave the New York-based firm authority to manage the exchange, according to filings submitted to the Securities and Exchange Commission.
Other owners of ELX Futures include banks like Citigroup Inc. (C), J.P. Morgan Chase & Co. (JPM) and Deutsche Bank (DB), as well as trading firms such as Getco LLC and Peak6 Investments Inc.
CME on Monday declined comment on reports that the exchange group was preparing to expand electronic trading hours of its agricultural futures complex in a bid to compete with ICE, which intends to offer the contracts for trading 22 hours a day.
