LME WEEK 2017 – INTERVIEW: NFEx on track and ‘not waiting around for a deal’

Non-Ferrous Exchange Markets (NFEx Markets) is on track to launch in 2018 but is yet to make a decision on its clearing house – a decision chief operating officer Mark Bradley says is firmly in NFEx’ hands.

“We are still talking to a number of tier one clearing houses and the choice for us of which one to go with is still in the balance,” Bradley said in an interview with Metal Bulletin.

Mark Bradley NFEx chief operating officer
Mark Bradley, NFEx chief operating officer

“Ultimately the choice is ours. We will continue our discussions with multiple clearing houses and the best commercial choice will be made,” he added.

LME Clear was originally one of four options for the new venue, Metal Bulletin understands. The others are ICE, SGX and CME Group.

“We are not waiting around for a deal to be put on the table; we are going to attract business from parts of the market that aren’t going into the clearing at the moment and we are happy to bring that to any clearing house,” Chris Evans, commercial director at NFEx, said.

“We’re giving something here – not taking – we have a great product and are adding to the market,” he added.

Market sources also told Metal Bulletin that they believe clearing on LME Clear is important to the success of NFEx. “My feeling is that clearing on LME Clear is important for LME members if NFEX is going to fly and that requires a certain amount of good spirit from the LME,” a source said.

London Metal Exchange ceo Matthew Chamberlain said in a recent interview that there was not enough support from members for the exchange itself to partner with a third party for an over-the-counter (OTC) platform.

In September following its discussion paper consultation, the LME released its strategic pathway document, noting that it would consider a permissioned dealer-to-client platform to enhance client’s electronic execution options in the market space. NFEx was the first name that sprung to most people’s minds.

‘Groundswell’ of support
But the change of heart from the LME is not something NFEx says has affected any of its plans. The new exchange believes it has more than enough support from the industry.

“We have had a groundswell of support from some members, and their end-users, who do not have access to these fragmented single dealer platforms or do have access but realise there is an efficiency to not having a pool of liquidity which everyone can access,” Bradley said.

“Anyone that is not involved in one of these OTC platforms has the fear of missing out; we are comfortable we have strong industry and member support,” he added.

NFEx will keep continue to engage the industry, focusing on keeping those that are less convinced by the idea involved enough so they know what is going on.

“Some people have their own dealer-to-client platforms; their approach is ‘We’ve got one, do we really want everyone to be able to share one?’” Bradley explained.

“So we have been trying to keep those people in the loop enough so that they see the benefits of growing the market overall even if they are not ready now to believe it is better for everyone if we have a central liquidity pool. We genuinely believe NFEx will help grow and benefit everyone,” he added.

All set for H1 2018
With the new exchange set to go live during the first half of 2018, the company said it is looking to provide a solution for the market for its next phase of transition.

“We’re going to be launching at a really good time for the industry as it looks at life post-MiFID II implementation. If we launched in January we’d be stuck in the middle of it and everyone will be focused internally,” Bradley said.

“Once the dust settles, people will hopefully be looking to grow their own business and looking to utilise our business to do so. We are looking to be the steady market utility that is going to offer a solution to everyone,” he added.

Since NFEx was unveiled in June, the company has moved quickly to bring it to market, with its most recent venture being the development of its RFQ platform – named NFEx Brokkr.

“We are going out to the market and showing them how we can use this technology to bring in all the different liquidity pools around the market into a more centralised focus. We want it to include price transparency, liquidity and the ability to get business done,” Evans said.

“There is a lot of business that takes place in these [different] pools but it is not easy to access it or to get a sense of the pricing so with NFEx Brokkr we are developing a tool that hopes to improve transparency in the market,” he added.