NYSE Euronext expects its New York Portfolio Clearing joint venture, which will offer one-pot margining of interest rate futures and cash Treasury positions, to be operationally ready by March.

Interest rate futures will be listed at NYSE Liffe US in March, to attack the fixed income derivatives market dominance of the CME Group. At first, NYSE Liffe US will be the only exchange cleared by NYPC.

CME Group, although facing a rising challenge from ELX Futures, a start-up, bank-owned exchange in New York, still hosts nearly all trading of US Treasury and Eurodollar futures and options.

On January 31 the Commodity Futures Trading Commission approved NYPC as a derivatives clearing organisation – despite the protests of ELX Futures.

ELX claims it is unfair for NYSE Liffe US to benefit through NYPC from one-pot margining, when ELX customers will not at first have access to NYPC.

The CFTC has yet to sign off the NYPC’s proposal to offer cross-margining of futures and Treasuries. But NYSE chief executive Duncan Niederauer said he expected NYPC to have the remaining regulatory approvals by the end of February.

The cash securities are cleared at the Depository Trust and Clearing Corporation’s Fixed Income Clearing Corporation – NYSE’s joint venture partner in NYPC. DTCC also requires the approval of the Securities and Exchange Commission.

Niederauer said NYPC was working hard to prepare for its March launch: “Significant work continues to take place with the go-live member firms, who represent some of the largest users of fixed income futures.”

NYSE Liffe US will list a full suite of interest rate futures. The exchange has previously said it would introduce Eurodollar futures and two, five, 10 and 30 year US Treasury futures. Options will come later.

Niederauer believes the ability to cross-margin futures positions with the underlying cash Treasuries will lure traders.

“We do believe if we build it, the volume will come,” said Michael Geltzeiler, NYSE’s chief financial officer. “There is fundamental value in cross-margining, and we expect significant volume early on.”

ELX cuts fees

Meanwhile, ELX has switched to a flat nine cent, one-tier bundled fee schedule for its US Treasury and Eurodollar futures as of the start of February. This works out at a 50% fee cut for the latter contract.

The exchange is promising reduced transaction costs for all market participants. It has also done away with minimum average daily volume requirements and scrapped all other fee tiers. It does not charge registration fees.

Neal Wolkoff, CEO, said in a statement: “ELX is committed to providing price competition and superior services to market participants. This new single-tier fee schedule is another new ELX initiative to benefit customers and foster competition in the global futures market.”