Lynn Martin was just named CEO of NYSE Liffe U.S., the U.S. division of NYSE Euronext’s international derivatives business. She was previously chief operating officer at the company and senior vice president at NYSE Euronext. She has been with the exchange for twelve years. She spoke with JLN editor Sarah Rudolph about her new role, the exchange’s acquisition of the Libor index, the one-year anniversary of the DTCC GCF repo index futures, and new and forthcoming products.
Q: Congratulations on being the first woman to head a U.S. exchange since the 1980s. What does that mean to you?
A: Thank you so much. You know, I didn’t realize that was the case until John [Lothian] pointed it out in his newsletter the other day. It makes the appointment special not just from a professional standpoint, but also from a personal standpoint. When I was growing up my mom and my grandma always used to say to me that I was so fortunate to be born when I was born, at a time when a woman had all the opportunities in the world in front of her. Being reminded of that every day forced me to work hard throughout my life, and it motivates me to continue to work hard, and also to be thankful for any opportunities that are presented to me, because women in the past didn’t always have those opportunities.
However, it’s not just the fact that I am the first woman to head a U.S. exchange since the ‘80s that makes this appointment special. Being named CEO of NYSE Liffe US is special because it’s always been our goal to deliver innovative products and services to meet the needs of our customers. It’s something that I think we’ve done extremely well in the last five years, and it is going to continue to be our mission going forward.
Q: Tuesday was the one-year anniversary of the DTCC GCF repo index futures traded on NYSE Liffe. How has the contract fared in its first year, and will the LIBOR acquisition affect that contract, which I believe is intended to be a sort of substitute to LIBOR?
A: I think I’m going to answer that question with a second question before I respond to the first question. There are quadrillions of dollars that are benchmarked to LIBOR. As a result, we’ve always advocated for the strong reform of the index. When we first started the conversations with DTCC in mid-2011 — we signed the license in December 2011 — there wasn’t any news about LIBOR. We were interested in the index because it was gaining credibility in the market based on the conversations we were having with rates desks at the time. The reason it has continued to gain credibility and is continuing to be adopted by many as a new benchmark is that the DTCC repo indices are transparent. They are based on actual transactions cleared by DTCC in the largest, most liquid short term financing market in the world.
Bringing it back to our GCF repo futures, our first year has been a fantastic success. As you know, the failure rate for new futures contracts is notoriously high. In our first year we traded over one million contracts, we’ve achieved record open interest of around 60,000 contracts, and we were named the most innovative contract by FOW. We’ve seen participation from major global asset managers, relative value hedge funds, banks and proprietary trading firms. Many of these market participants don’t typically support a new product, so the fact that we’ve had this breadth of participation in just our first year has shown us that our initial theory, that this was a product the market needed and the market wanted, was true.
Q: NYSE Liffe US recently collaborated with MSCI to launch index futures on MCSI equity indices. How are these MSCI index futures doing? What sort of milestones have they reached so far? And what types of investors are showing interest?
A: I would say our MSCI story has been one of the stories we are most proud of at the exchange. Our team has worked tirelessly to deliver to the market a liquid emerging markets and EAFE future. When we took the emerging markets and EAFE futures products over in June of 2011, the average daily volume in those two products combined was around 10,000 contracts and the open interest was about 70,000 lots. Our last quarterly average daily volume was 33,000 contracts and the open interest is now 320,000 lots in those products alone. We see participation daily from global delta one desks, institutional owners such as pension funds, asset managers, hedge funds, proprietary trading firms and a wide variety of other market participants. We’re also gaining participation from all centers of the globe. Europe has contributed to our volume growth recently and Asian participants are also starting to get involved.
One of the focuses of our team is going to be on growing the MSCI products further. We’ve recently launched futures on the MSCI World index, futures on the MSCI Emerging Markets Latin America index, and futures on the MSCI Canada Index. We will be rolling out additional products very soon.
Q: Has the recent drop in precious metals prices affected volumes in gold and silver?
A: We’ve had some good days in our precious metals complex on the back of the market volatility. Back on April 15 when gold dropped about 10% we achieved a new record in our mini gold futures, trading more than 34,000 contracts in a single day.
Q: How is the one-pot cross margining initiative with New York Portfolio Clearing progressing?
A: I believe that capital efficiency has never been more important and will never be more important to firms than it is now and will be in the short term future. I think firms are only just starting to grapple with the idea of capital efficiency and figure out what it means for their firm and their individual traders. NYPC’s value proposition does exactly what says it’s going to do — it delivers capital efficiencies to the market. Since its launch in 2011 it has returned over $45 billion in capital efficiencies to the market. Members have achieved savings of between 50 – 60% at peak off of their combined fixed income cash and fixed income futures portfolios, and at peak members have seen savings of $40 million in margin a day, just as a result of the one-pot margin methodology.
I’d like to take this opportunity to thank our customers and market participants who have supported our exchange throughout the last 5 years. I recognize that supporting a U.S. futures exchange, particularly a new one, is not always easy, but without the liquidity our participants have provided we would not have been able to deliver the vibrant marketplace we have in the last 5 years. We will continue to work with our customers to provide innovative products and services.