On board for the planned June launch will be ELX’s founders — including BCG Partners Inc., Citadel Investment Group, Citigroup Inc., Deutsche Bank A.G., Bank of America-Merrill Lynch, Barclays PLC, Credit Suisse Group, Getco, J. P. Morgan Chase & Co., Peak6, and Royal Bank of Scotland PLC — as well as a number of high-volume traders that ELX has signed on, executives say.
“We are confident that ELX Futures will be a strong and needed competitive alternative in the mainstream futures exchange marketplace that will benefit all market participants,” CEO Neal Wolkoff said in a statement Wednesday announcing approval by the Commodity Futures Trading Commission.
But bad blood between a Chicago software executive and one of ELX’s New York-based founders may keep some traders from accessing the new market.
Harris Brumfield, a former Treasury futures floor trader at the CME-owned Chicago Board of Trade, sued BCG Co-CEO Howard Lutnick several years ago over alleged patent infringement. Mr. Brumfield, who runs software firm Trading Technologies International Inc., claimed that Mr. Lutnick’s firm, known at the time as eSpeed Inc., illegally copied Mr. Brumfield’s software. The courts sided with Mr. Lutnick.
Now, Mr. Lutnick’s firm is the technology provider to ELX. And Mr. Brumfield — whose Web site claims that half of the volume at the world’s five biggest exchanges goes through Trading Technologies’ trading platform — has refused to connect to the fledgling exchange.
A Trading Technologies saleswoman in March acknowledged that Mr. Brumfield’s past run-in with Mr. Lutnick was hampering talks. This month she declined to comment. Mr. Wolkoff likewise declined to comment on the relationship.
Other ELX officials say that Trading Technologies doesn’t account for as much trading as it claims and that ELX’s start won’t be hampered by its refusal to sign on because other software providers are writing to the exchange.
Software dustups aside, it’s clear that ELX is up against great odds. At least three prior startups have tried and failed to wrest marketshare from the established Treasury futures market at the Chicago Board of Trade.
But the recent success dealers had in moving liquidity in a key part of the mortgage business, known as “to be announced bonds,” from a platform run by broker-dealer ICAP PLC to one controlled by the dealers themselves is being touted as a potential model for the new exchange.
ELX is expected to announce pricing for the new market in coming weeks.
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