Neal Wolkoff, CEO of ELX Futures, was in Chicago this week serving as Chairman and host of The LaSalle Street Dinner Dance, which benefits the Chicago Area Council, Boy Scouts of America. While not on official ELX business, Wolkoff sat down with Futures to discuss ELX’s progress.
Wolkoff joked, “Pretty soon these guys (pointed to the Chicago Board of Trade building where the event was held) will be begging me for fungibility.”
While no one expects that to happen anytime soon, ELX has gotten out of the gate 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. “I am signing approval letters on a daily basis for collocation customers, for direct market access customers. The ISVs are looking for alternative marketplaces. ELX has definitely made a splash in the marketplace. This is something that is a force to be reckoned with.”
Wolkoff notes that ELX volume has been growing nearly each day, surpassing 50,000 contracts one day this week. He acknowledges that most of the volume has come from ELX investors but that is something previous exchanges taking on the CBOT Treasury complex failed to do in a major way.
“A lot of the trading is in the form of arbitrage between the CME and ELX. We are getting some volume from dealer desks, we are not getting volume yet from the traditional customer base like a hedge fund base or institutional base,” he says. “What we need to do is develop more depth in the market, what we have done successfully— not withstanding some of the comments by some of the more biased people in the market — is we have been very successful in mirroring market pricing, especially during the traditional U.S. market day.”
He says that from 7:30 a.m. to 3:00 p.m. their prices are dead on with the CME and estimates that their depth of market—the size of the bid/ask spread — has been roughly 20% of what is on CME Group’s Treasury complex.
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. He says ELX can do this because the correlation with the cash market is tighter than that of CME Group. ELX notes that basis trades have ultra low latency because the BGC cash market and ELX Futures exchange are collocated and share the eSpeed platform.
Wolkoff says he is not being arrogant but he sure sounds confident and he definitely was prepared, as any good scout should be.
Watch here and on our blog (www.buytherumorsellthefact.com ) for more of our conversation with Neal Wolkoff.