JERSEY CITY, N.J. (HedgeWorld.com)–Competition might heat up among futures exchanges as the new kid on the block, BrokerTec, works to improve service while keeping fees down.
Since it launched its first product in 2000, the electronic exchange has suffered from low trade volumes compared to the long-established Chicago Board of Trade. But BrokerTec is making changes that increase speed and flexibility. For example, last month it reduced the minimum tick size of the five-year Treasury note contract from one half of 1/32nd of a point to one fourth of 1/32nd of a point.
“As we deliver better price and better execution than the competitor, people become more willing to come to us,” BrokerTec President Hank Mlynarski said. “The growth of the futures market in the U.S. has been stunted because exchange providers don’t have rules and cost structure and policies conducive to the interests of clients.”
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Mr. Mlynarski has a lot to say on the practices of futures exchange operators. Differential pricing is one major complaint. “I don’t know any other successful industry that charges its best and most active customers the most, except the U.S. futures market,” he said.
At the CBOT, non-member customers, for example hedge funds, have to pay fees that are many times what exchange members are charged for the same trade, he pointed out. “The customer is charged the most,” said Mr. Mlynarski.
“That is an unstable pricing model. Competition in the marketplace will dramatically reduce the cost of execution to the end user. That is what we are about,” he added.