Nasdaq OMX Group Inc., the second-largest U.S. equity-exchange operator, plans to start an interest-rate derivatives trading platform in London, competing directly with NYSE Euronext and Deutsche Boerse AG.
The New York-based company, which operates seven Nordic and Baltic exchanges, will start London-based NLX in the first quarter of 2013. The venue will be registered as a multilateral trading facility and offer a range of short-term and long-term interest-rate derivatives, Charlotte Crosswell, chief executive officer of the new system, said in an interview today.
Regulators globally are pushing for more over-the-counter derivatives to be processed by clearinghouses or traded on exchanges to reduce systemic risk.
NYSE Euronext’s London-based Liffe dominates the market for short-term interest-rate products and Frankfurt-based Eurex, Europe’s largest futures exchange, handles long-term products.
“We can create lookalike contracts,” Crosswell said today. “Customers will be able to trade both the long end and the short end of the curve on one platform now. We will be competitive on price.”
The European Commission blocked a proposed combination between Eurex and Liffe in February, saying their coming together would stifle competition in derivatives. Deutsche Boerse, which owns Eurex, had agreed to buy the operator of the New York Stock Exchange in a deal valued at $9.53 billion when it was announced in February 2011.
Nasdaq’s NLX will use LCH.Clearnet Group Ltd., the largest clearinghouse for interest-rate swaps, for clearing and settlement services. Clients will be offered cross-margining, Crosswell said today.
“We should continue to expect new entrants into the European derivatives market, but gaining traction from the incumbents will be difficult,” Peter Lenardos, an exchange analyst at RBC Capital Markets, said at the Federation of European Securities Exchange’s annual convention in Istanbul today. “It will be difficult to judge the success of this project this year or next.”