By Doug Cameron Of DOW JONES NEWSWIRES CHICAGO -(Dow Jones)- NYSE Euronext (NYX) is eyeing a move into emissions trading and could create its own clearinghouse for U.S. futures, according to a senior executive.
The twin moves are part of a wider expansion in derivatives by the transatlantic exchange operator amid the intensifying competition faced by its equities operations.
The owner of the New York Stock Exchange picked up London-based Liffe, the world's third-largest futures exchange, as part of this year's merger with Paris-based Euronext.
"We've transformed into a global company," said Hugh Freedberg, chief executive of Liffe and head of the parent company's global derivatives operation.
While NYSE prized the potential of the derivatives business, it is slowing growth in futures that has weighed on its stock price, alongside uncertainty over equity volumes after the recent volatility-driven spike.
NYSE Euronext shares were down 69% year-to-date at the close of trading Thursday. The stock was recently down 6% at $25.37.
It has underperformed the three larger global exchange groups by market value - CME Group Inc. (CME), Deutsche Boerse AG (DB1.XE) and Hong Kong Exchange and Clearing (0388.HK). Archrival Nasdaq OMX Group Inc. (NDAQ), which ranks sixth, is down 51% year-to-date.
NYSE Euronext Chief Executive Duncan Niederauer has introduced a raft of initiatives since taking the helm from John Thain last December, broadening its product and geographical focus and using pricing and technology to stem share losses in equities.
It is still derivatives that retain the greatest promise, with Liffe expected to launch the first clearing service for credit-default swaps in Europe next month, while U.S. regulators grapple with a similar domestic offering.
"We're not going to knee-jerk our strategy," said Freedberg in an interview with Dow Jones Newswires on the sidelines of the Futures Industry Association conference in Chicago this week.
Freedberg insists investors "understand the story," and said he did not feel under pressure to change it despite the dismal performance of the stock, and the sector.
Innovation At A Premium Nevertheless, the pressure remains on Liffe to deliver and differentiate its offering. Among exchanges, it has come in for particular criticism over its past record for innovation and product development.
"It leaves a lot to be desired," said Tom Callahan, the former Merrill Lynch executive hired to head the nascent NYSE Liffe unit. While he was diplomatically talking of innovation across the industry rather than Liffe specifically, the new U.S. business is seeking to break the mold in a number of ways.
For starters, it is looking to seed the U.S. business through an array of partnerships that could see as much as 49% of its equity taken by banks and other dealers.
Callahan said all options are open in terms of collaboration, but product design will be a key issue if NYSE Liffe is to challenge the 98% share of U.S. futures trades held by CME.
The unit started with gold and silver futures acquired from CME earlier this year, with volumes running at around 30,000 contracts a day.
NYSE Liffe will switch to the Liffe trading platform with upgraded technology allowing it to handle the 4 million contracts handled daily by its European sibling.
Callahan admits it will be the second quarter of 2009 before additional products are rolled out in the U.S., focused on avoiding replicating contracts available at other exchanges.
Equity-related products such as some built around exchange-traded funds are expected to provide the focus, reflecting the strength of its parents in the cash markets.
It is also likely to try and roll out some of its European product suite in the U.S., including the successful BClear system for processing over-the-counter products.
Freedberg said CDS and wider OTC markets will be a focus for growth over the next five years, but reiterated that Liffe will not be entering the energy derivatives market, which he sees as well served.
The nascent emissions-trading market on both sides of the Atlantic is, however, one in which Freedberg sees opportunities.
Nasdaq OMX recently announced it will develop standardized products for European and U.S. clients looking to manage and trade allowances for emissions such as carbon dioxide and sulfur dioxide. Eurex, the derivatives arm of Deutsche Borse, and the Green Exchange unit of CME are also active in the space.
To serve an expanded product suite in the U.S., Freedberg said a wholly owned clearinghouse is one option under consideration. From next March, NYSE Liffe will clear through the Options Clearing Corp. for an unspecified period.
"We aim to own more of the clearing chain," said Freedberg, who has already brought more of the clearing function of its European arm in-house, renegotiating its existing partnership with LCH.Clearnet.
- By Doug Cameron, Dow Jones Newswires; 312-750-4135; doug.cameron@dowjones.com
(Jacob Bunge contributed to this article)
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(END) Dow Jones Newswires
November 14, 2008 12:16 ET (17:16 GMT)

Publié le 14 novembre 2008 Copyright © 2008 Dowjones