NYSE Euronext (NYX) announced that it planning to launch a new derivatives marketplace in the United Kingdom and Europe in 2013 that will permit private traders and investors to trade CFDs mirroring currency pairs, commodities and other markets, according to insider sources.
The exchange intends to create a web-based market in so-called contracts for difference; futures-like financial products which have dramatically increased in popularity amongst retail traders in recent years.
The size of the market is thought to be massive according to a NYSE Euronext official with foreign exchange linked CFDs making up an estimated $8 billion market.
It is understood that NYSE Euronext intends to setup an exchange-like model that depends on market-makers to transact business with private traders. The company has already committed $11 million to developing the new market this year and aims to launch the first contracts in the first quarter of 2013; according to an investor prospectus.
Providers like IG Group plc (via IG Markets) have for over a decade quoted markets in CFDs, but NYSE Euronext aims to take a different approach by setting up an exchange-like model that relies on market-makers to do business with retail investors as opposed to it acting as a counterparty. Specifically Euronext intends to rely on market-making companies and professional traders to take the other side of trades with private retail customers in a multilateral trading facility (MTF). The MTF will allow contracts on securities and products listed on any exchange.
Garry Jones, NYSE Euronext’s head of global derivatives emphasised that this is very exciting as the size of the market is massive. He added ‘We’ll have first-mover advantage in the sense that we will not be trading against our clients,’ noted Garry Jones, NYSE Euronext’s head of global derivatives.
NYSE Euronext is about to sign understandings with partners to help it launch the venture and the company intends to use external technology to develop a new web-based platform.