ELX to SEC: new rules unfairly benefit NYSE

*Proposed rule makes NYSE’s clearer a ‘monopolist’-ELX

*NYSE’s clearing venture would help it compete against CME

*Some ELX owners support NYSE’s clearing venture

By Ann Saphir

CHICAGO, Dec 16 (BestGrowthStock) – ELX Futures LP told regulators
late Wednesday that a proposed rule would give NYSE Euronext’s
U.S. futures exchange an unfair advantage against ELX in
competing against CME Group Inc, and should be rejected.

ELX Futures, whose own attempt to challenge CME Group
(CME.O: )’s dominance in the lucrative market for Treasury
futures trading has met with limited success, said that the
proposed rule will enshrine NYSE Euronext (NYX.N: )’s co-owned
New York Portfolio Clearing as a “monopolist.”

The rule would enable NYPC, a joint venture between NYSE
and the Depository Trust and Clearing Corp., to cut traders’
costs by allowing them to effectively clear Treasury securities
and futures at a single clearinghouse, reducing in many cases
the money they must put up to back their trades.

NYSE plans to begin competing in Treasury futures next year
through its U.S. futures exchange, NYSE Liffe U.S. The
contracts would be cleared through NYPC, which would offer
savings on margins through an exclusive “one-pot margining”
arrangement with a DTCC unit that clears Treasury securities.
Neither ELX or CME have a similar deal.

“The proposed arrangement effectively — and improperly —
advantages NYSE Liffe over other futures exchanges,” ELX lawyer
Richard Marshall said in the letter. “Permitting NYSE Liffe to
offer one pot margining through its clearing agent of choice
when ELX cannot threatens to deprive investors of one of the
few alternatives to CME–ELX.”

Since its July 2009 launch, ELX has captured just 2 percent
to 3 percent of the overall market in Treasury futures, which
was created by CME Group’s Chicago Board of Trade. The
contracts are one of CME’s biggest revenue sources, with
interest-rate contracts – including short-term rate futures
that ELX also offers — generating $2.5 million in fees each
day in the third quarter.

ELX’s latest letter is part of a broader campaign to delay
or derail NYSE Liffe’s start altogether. Earlier this month ELX
asked the Commodities Futures Trading Commission to reject
NYPC’s application to become a clearinghouse, saying its
clearinghouse’s arrangement with DTCC undermines competition.

Even as ELX rails against NYPC, some of the start-up’s
founding members are pushing for its approval.

Goldman Sachs, Getco, Morgan Stanley, and UBS, all listed
as “founding partners” on ELX’s website, wrote letters of
support for the NYPC’s CFTC application, saying the new clearer
would enhance competition.

All four have a minority stake in NYSE Liffe. None of ELX’s
other major partners wrote similar letters.
(Reporting by Ann Saphir; Editing by Theodore d’Afflisio)

ELX to SEC: new rules unfairly benefit NYSE