dw_march_2015_pdf

“Nasdaq is aiming high
and projects to take over
10% of this market in two
years. But how will these
ambitions be realized?”
clearing fees. In 2013, the energy contracts’
share was over 55%.
CME, according to the 2014 annual report,
enjoyed the annual increase in transaction
and clearing fees by 6% to $2,616 million,
which was, however, mainly attributed to
interest rate products. Similar to ICE,
energy contracts have not exactly been
shining stars: their average daily volumes
represented only 12% of the total volume of
trades in 2014, which was a 2% decrease
compared to the previous year’s data.
The not-so-wonderful performance of the
energy contracts in the commodity
exchanges’ portfolios can be explained by
several factors, the most obvious of which is
the market caution regarding the future of oil
markets and a somewhat apathetic outlook
for natural gas.
So what does really attract Nasdaq to
products that are currently not economically
attractive? My bets are on Nasdaq’s intent of
taking over the market share by applying the
low price strategy. In fact, it has been
suggested by some sources that the
exchange is planning to move into the
energy space by lowering the cost of trades
by 50%. At the same time, Nasdaq has been
negotiating bringing on its side such trading
giants as Goldman Sachs, JP Morgan,
Morgan Stanley, and others. The quote by
Hans-Ole Jochumsen, the President of
Nasdaq, in the corporate press release
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starts with the statement that Nasdaq’s
“strategy is always to meet demand where
competition is lacking.” It is an absolute
truth: while the market is well developed and
liquid, it is being run by duopoly. And with
Nasdaq specializing in stock trades, which
are usually operating under lower margins
than commodity markets, frugality will not
be a shocker but more of a standard modus
operandi. In the end, entering the markets
when the big guys are already losing and are
unlikely to compete by slashing prices could
have been a well thought-out, tactical move.
As for the rest of us: there is nothing wrong
with lower costs and more alternatives for
those who are shopping around. <
Editorial
March 2015
6