Five Minutes With Neal Wolkoff

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Five Minutes With Neal Wolkoff


Neal Wolkoff is the CEO of ELX Futures, L.P. He was named to the position on Oct. 6, 2008. Previously, he had been CEO of the American Stock Exchange prior to its acquisition by NYSE. At issue as of late for ELX Futures is that an exchange for futures (EFF) block-trade mechanism offered by ELX Futures allows traders to move their Treasury futures positions from one exchange to the other. CME Group has claimed ELX's EFF violates CME's rules. Both exchanges have petitioned the Commodity Futures Trading Commission (CFTC) to decide the issue. Wolkoff talked with MarketsWiki Senior Editor/ Producer Christine Nielsen.

Q: So I'm trying to get a handle on where things stand with these petitions to the CFTC regarding EFFs. Could you first give me your impressions on that?

A: The submission of information is over, although the CFTC could ask for more information; but I can't speak for the agency. We’ve been pleased that the Commission has been responsive on the EFF issue and has publicly stated that EFFs do not violate any laws or regulations.

Q: Have you had a chance to read the interview we recently did with Foley & Lardner's Scott Early? What about this idea of a natural barrier disadvantage?

A: I would just preface this by saying that he (Scott Early) has been a well-respected regulated futures industry attorney for a number of years. By getting into economic theory and intellectual property, he steered away from his area of expertise. Plus, based on his statement that there is an intellectual property right in a product, the reality is that this does not exist. The reality is that there's nothing to patent or to copyright. We're not doing anything that a normal competitor wouldn't do. The CME is essentially a monopoly. There's nothing about ELX using this EFF mechanism that is illegal and this has never been an argument about intellectual property. The role of the exchanges includes promoting the best interest of the investing public. We're confident that we've been on the right side of this issue.

Q: What type of feedback have you gotten from market participants?

A: People are generally interested, and market participants are interested and have privately told us so, but there’s a conscious resistance to publicly come forward because of the CME’s dominance in the industry.

Q: What does ELX hope to achieve overall - in terms of market share of Treasury products?

A: We've been live now for a year. We've added customers, brought on a successful Eurodollar futures contract. We want to grow to become a company with greater product reach, and increase our market share. We're doing very well and we're in a very good position. We are growing, adding users and I believe we have proven ourselves as a real competitor to the CME. It would be a good thing for market participants and the futures industry if we get the EFF mechanism approved.

Q: How would you see this playing out if the CFTC gives its nod on the use of the EFF mechanism?

A: A number of market participants would use it. What the EFF allows is for market participants to access the best available price across markets without paying a double margin or facing delivery obligations to deliver on one market and take delivery on another.

Q: What is next for the exchange?.

A: [Without giving too much away] we have plans for enhancing liquidity; we plan to add new products, continue to diversify and increase our volume and open interest. Our Eurodollar futures contract was launched four months ago and has been a big success so we hope to keep up the momentum.