Exchanges launching look-a-like contracts in competition
with incumbents is creating more costs than benefits, a group
of Commodity Trading Advisors have said.
Speaking at FOW’s private buyside forum last
month, a selection of leading London-based CTAs said that
challenges posed by the launch of look-a-like contracts were
often outweighing the benefits of a competitive market.
Across Europe and the US, a new age of competition is coming
to the exchange traded derivatives market as exchanges seek to
wrest liquidity from rivals. Often this takes the form of an
exchange launching a replica of a liquid contract on a rival
The fragmentation of liquidity, increased instances of
slippage and distortion of market pricing were cited as the key
drawbacks from look-a-like contracts.
Exchanges often implement aggressive fee-structures for new
contract launches – often offering free trading - and
incumbents frequently cut fees in response to a challenge.
However, the CTAs attending the forum said that the fee
reductions did not compensate for the increased operational
The forum, which was held in partnership with Object Trading
and ABN Amro, brought together a group of CTAs, proprietary
trading firms and brokers.
The participants discussed a range of operational challenges
from regulation to FCM consolidation. The discussion was set
out in a free whitepaper, which can be downloaded
To download the whitepaper, click here.
For more on Object Trading, click
For more on ABN Amro, click