Throwing its hat into the lucrative energy derivatives arena with veterans Intercontinental Exchange Inc. and CME Group, Nasdaq said Wednesday it has established an energy futures market with the support of leading commodities participants.
The exchange said Nasdaq Futures (NFX) would offer competitive pricing, an innovative clearing solution and high-performance technology for futures and options based on key energy benchmarks including oil, natural gas and U.S. power. NFX would launch mid-2015, pending regulatory approval.
The exchange added that it has secured support from trading firms, inter-dealer brokers, and futures commission merchants to facilitate broad product distribution and early liquidity. Founding market participants include ABN AMRO Group, Advantage Futures, Goldman Sachs, JP Morgan, Morgan Stanley and Virtu Financial.
"Our strategy is always to meet demand where competition is lacking, and our global benchmark product suite will provide commodity market participants across the planet with a new solution to meet their trading and hedging needs," said Nasdaq President Hans-Ole Jochumsen. "We will leverage our market expertise and the client relationships we've established through our global commodities business, which already includes the world's most liquid electricity market and the leading market for freight derivatives, as well as trading in German, Dutch and UK energy derivatives."
Nasdaq said it would offer cash-settled energy derivatives with a transparent fee structure. As the products would be cleared through the Options Clearing Corporation (OCC), the exchange said market participants may benefit from OCC's more than 40 years of experience in derivatives clearing and its industry utility clearing model that passes on operating efficiencies in the form of reduced costs.
"OCC has a proud history of clearing a wide variety of derivatives products for Nasdaq," said OCC President Michael McClain. "We look forward to expanding the use of our world-class operational and risk management infrastructure to clear energy derivatives for NFX."
NFX, the exchange group's U.S.-based designated contract market, plans to leverage the exchange group's Genium INET technology, and would be headquartered in Chicago. Nasdaq said the platform provides open and neutral access, and firms would be able to access the market through proprietary order management systems, broker platforms and leading independent software vendors.
Nasdaq's Global Commodities business offers trading and clearing solutions for various related assets including power, natural gas and carbon emission markets, tanker and dry cargo freight, fuel oil, seafood derivatives, iron ore, electricity certificates and clearing services.
Trading Technologies International Inc. (TT), a global provider of professional trading software, plans to introduce connectivity to NFX on day one of trading through both its TT and X_TRADER platforms. TT said its connection to NFX would provide the trading community with more choices for investing in energy derivatives, improving price discovery and providing deeper liquidity.
"The new link to NFX will give all TT customers across the globe ease of use to tap Nasdaq's leading markets and trade complex strategies across a range of assets, including energy and freight derivatives, European interest rate derivatives, equity and index futures and options, U.S. Treasury Securities and U.S. Treasury Futures products," TT said.