Nasdaq Launches New Energy Derivatives Trading Venue

Nasdaq has expanded its global commodities solutions with the establishment of Nasdaq NFX, the exchange group's new energy futures market. Due to launch mid-2015, pending regulatory approval, Nasdaq NFX is designed to introduce competitive pricing and an innovative clearing platform to the futures and options market, based on key energy benchmarks including oil, natural gas and US power.

"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," says Hans-Ole Jochumsen, president of Nasdaq. "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."

Technology Input
Following the Nasdaq announcement, Chicago-based software provider Trading Technologies (TT) stated that it would introduce connectivity to the NFX on the opening day of trading through both its TT and X_TRADER platforms, including all application programming interfaces (APIs) as well as its TTNET hosting service and MultiBroker ASP solution.

"We are happy to partner with Nasdaq as a preferred vendor in the launch of this new exchange," says Rick Lane, CEO of TT. "We have a large base of customers already utilizing our software to access and trade the energy markets, including many of the most well-known commercial energy firms. We expect our users will find the Nasdaq futures offering to be very compelling, and we look forward to providing them with direct access to NFX."

The NFX platform will utilize the exchange group's Genium INET technology to provide open and neutral access to the market through proprietary order management systems, broker platforms, and independent software vendors like TT. Energy derivatives products on the NFX will be cleared through The Options Clearing Corporation (OCC), which is already clearing a wide variety of derivative products on behalf of Nasdaq.

"While the depth of liquidity of NFX will not immediately rival the CME and ICE, between Nasdaq's full support and aggressive pricing, we expect strong interest from the various market participants at launch. The lower cost of business might also make energy products more appealing for professional traders who specialize in other asset classes."

Industry-Backed initiative
The initiative is endorsed by a number of trading firms, inter-dealer brokers, and futures commission merchants (FCMs), who wish to facilitate broad product distribution and early liquidity. Market participants include ABN AMRO Group, Advantage Futures, Goldman Sachs, JP Morgan, Morgan Stanley, and Virtu Financial.

"Today's Nasdaq announcement is evidence of a rising tide in futures markets, bringing futures on the same path with the competitiveness of the equity market, where several exchanges list the same products," says Hazem Dawani, CEO and co-founder of OptionsCity Software. "While the depth of liquidity of NFX will not immediately rival the CME and ICE, between Nasdaq's full support and aggressive pricing, we expect strong interest from the various market participants at launch. The lower cost of business might also make energy products more appealing for professional traders who specialize in other asset classes."

OTC Global Holdings also announced that it would provide brokerage services and access to its EOXLive active platform to support the launch of energy derivative contracts on the NFX.

"As part of OTC Global Holdings' continued expansion of the EOXLive platform, we will provide our customers with pre-trade price transparency and straight-through processing for Nasdaq energy products at the exchange launch date" says Javier Loya, chairman and CEO of inter-dealer broker, OTC Global Holdings. "We have been very impressed with Nasdaq's people and technology, which build on their existing platforms and global energy products. Our investment in this integration is part of our vision to provide the deepest liquidity and make it easier for more firms to trade and hedge commodities futures and options."