The NASDAQ OMX Group, Inc. (NASDAQ:NDAQ), best known for its equity trading, is looking to draw smaller investors to a series of currency futures while its biggest U.S. competitor is being purchased by a derivatives market. Nasdaq’s biggest competitor in U.S. stocks, NYSE Euronext (NYSE:NYX), is in the process of being acquired by Atlanta-based futures market owner IntercontinentalExchange Inc (NYSE:ICE).
With a contract size of $10,000, the offerings will pair U.S. dollar with the Australian dollar, British pound, Canadian dollar, euro, Japanese yen and Swiss franc. NASDAQ OMX Group, Inc. (NASDAQ:NDAQ) is hoping that the (reasonably) low contract price will appeal to those that might not otherwise find themselves looking at such products.
NASDAQ has rapidly become more than a U.S stock trader
According to Dan Carrigan, the president of Nasdaq OMX Futures Exchange, this is the first in a line of future products that NASDAQ OMX Group, Inc. (NASDAQ:NDAQ) will offer to investors. NASDAQ OMX Group, Inc. (NASDAQ:NDAQ) has rapidly become more than a U.S stock trader having expanded into European equities and with its purchase of the ESpeed platform that allows for the trading of U.S. Treasuries.
“Our vision is to bring to market an FX product that makes sense to retail investors,” Carrigan said by phone. “Our goal is to plant a flag in the futures industry, and this is the first set of products that gets us on that radar screen.”
The $10,000 contracts will be priced in $1 increments and be settled in U.S. dollars after being cleared by Chicago-based Options Clearing Corp.
“It’s a very clean and transparent ecosystem, which when you compare to the more over-the-counter marketplaces, you don’t have the same level of comfort,” said Phil Harris, a NASDAQ OMX Group, Inc. (NASDAQ:NDAQ) adviser in New York City.
NASDAQ will struggle to break into this market
NASDAQ OMX Group, Inc. (NASDAQ:NDAQ) will struggle to break into this market according to Craig Pirrong, a finance professor at the University of Houston.
“We know the reason the success rate is so low is because liquidity attracts liquidity,” he said in a phone interview. One exception was in the 1990s when Eurex took trading of bond futures from Liffe due in part to a rapid shift toward electronic trading from floor-based open-outcry buying and selling, Pirrong said.
They also face stiff competition from the world’s largest futures exchange, CME Group Inc (NASDAQ:CME) which offers E-Micro contracts for 12,500 euros.
NASDAQ OMX Group, Inc. (NASDAQ:NDAQ) is “going head-to-head with the currency micro products at CME,” Pirrong said.
This reporting was possible thanks to the good people at Bloomberg, specifically Sam Mamudi and Matthew Leising.