That is the motto of the Boy Scouts and ELX Futures CEO Neal Wolkoff — in town to host the LaSalle Street Dinner Dance, which benefits the Chicago Area Council of Boy Scouts of America— was prepared to tout the performance of his exchange two weeks after it began trading.
“We have been increasing volume every day. I want to get to the point where [CME Group is] asking us for fungibility,” Wolkoff joked.
While no one expects that to happen, ELX has gotten out of the gate well and Wolkoff wanted to make clear that the upstart exchange is viable and in it for the long haul.
“I see the Chicago market dismissing us on earnings calls. That is just fantasy. ELX is here, it has arrived, it is growing, it is developing customer relationships,” Wolkoff says. “ELX has definitely made a splash in the marketplace. This is something that is a force to be reckoned with.”
We don’t see the CME Group leadership quaking in their boots yet—actually we did not see them at all at the event even though it was held at the CBOT— though ELX appears more formidable than a year or so ago when CME CEO Craig Donohue referred to them as the Ex Lax exchange at an industry event.
Wolkoff talked about the value proposition ELX’s proximity to its cash market partner represents. He says the correlation with ELX and the cash market is tighter than that of CME Group and the cash market. ELX notes that basis trades have ultra low latency since the BGC cash market and ELX Futures exchange are collocated and share the eSpeed platform.
His goal is to continue to improve pricing to the point that ELX has better pricing than the CME. “When I say better pricing I am not being arrogant about it but when we are tying the cash market together with the futures market we believe that in weeks we will have the potential to be at or better than the CME price in size,” Wolkoff says.
While he joked about fungibility, that has never been a laughing matter for Futures exchanges and as apposed to the last time the industry was discussing the issue—however you define it—there appears to be support from the regulatory community.
“I think [CFTC Chairman Gary Gensler] is the first chairman who talked at all about fungibility. What fungibility is, is the ability [to] buy on one exchange and sell on the other and you are able to offset those contracts and never think about it a second time,” Wolkoff says.
He acknowledges that there are different views on fungibility but says that competition must involve different clearing houses as well as different exchanges. “If there is an exchange traded model that happens we would certainly want to be involved in trading any product that becomes tradable on exchange. If they are tradable I am happy that they would trade on multiple exchange models and I certainly would like to see them be cleared at multiple clearing houses.”
When it was pointed out that as an executive for the New York Mercantile Exchange he was one of the more eloquent defenders of the status quo the last time the issue of fungibility and delinked clearing was being discussed seriously by the industry, Walkoff acknowledged this but noted that things have changed. “At that time the eloquent spokesman was employed by a vertical clearing organization in a multiple exchange market not a single exchange market where one entity traded 96.25% of all futures contracts domestically, as was the case in May,” Wolkoff says.
Watch here and on (www.futuresmag.com) for more of our conversation with Neal Wolkoff. More on fungibility to come.
Tags: ELX, Fungibility, Wolkoff
