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Bringing Nasdaq’s Derivatives Franchises Together

Kevin Kennedy now has two jobs. Formerly just the head of U.S. options for Nasdaq, he’s now also the head of the Nasdaq Futures Exchange (NFX), a post left open by the departure of Rick Beaman.  

Kennedy inherits a still nascent endeavor – it was formed in 2015 – that is largely focused on energy products. Despite its youth, NFX has hit some home runs. NFX’s natural gas options have plenty of traction and the exchange’s open interest in energy products represents 11.5 percent of overall U.S. energy product open interest.

The challenge now is to grow NFX’s participatory pool.

“Over the last three years, we’ve had really good growth with banks,” Beaman said. “If 2018 has been good for one thing it is the interest of merchants and utilities.”  

To help with the value proposition, Nasdaq is prioritizing straight through processing, an offering on hand at CME and ICE. One area where NFX differs from ICE and CME is it does not sport the same vertically-integrated exchange model, since the OCC handles its clearing. That allows NFX to be cost competitive with CME and ICE.

As for new products, Nasdaq continues to look at and evaluate the crypto space. Nothing is official, as Nasdaq has concerns about the regulatory environment, but were Nasdaq to bring a crypto product to market, it would be on NFX. Already this year, Nasdaq migrated its suite of freight derivatives from the Nordics to NFX and made a foray into interest rates with the self-described “soft launch” of DV01 Treasury Futures to help market participants hedge portfolios of cash Treasuries.    

Despite the addition to his duties at Nasdaq, Kennedy said it’s a transition made easy by the NFX staff.

Beaman did not disclose where he is headed next, although he did say it is a business that does not compete with Nasdaq.

 

Edited by Sarah Rudolph

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