By Alexander Osipovich
Nasdaq Inc. said it has agreed to sell its struggling energy-futures business, NFX, to a unit of German exchange group Deutsche Börse, giving up on its four-year effort to break into commodities.
NFX's core assets -- including its oil, gas, electricity, metals and freight futures markets -- will be transferred to Deutsche Börse's energy arm, EEX Group, by 2020 as part of the transaction, Nasdaq and EEX said in a joint statement Tuesday. The terms of the deal weren't disclosed.
Nasdaq launched NFX with much fanfare in 2015, in a bid to grab market share from the two giants that dominate U.S. commodity-futures trading, CME Group Inc. and Intercontinental Exchange Inc., known as ICE.
Nasdaq's chief executive at the time, Robert Greifeld, said his company would challenge a "monopolistic environment" in energy trading by undercutting CME and ICE on trading fees by as much as 50%. NFX launched futures contracts that were identical to existing futures on U.S. natural gas, Brent crude oil and other products at CME and ICE, except that they were settled through cash payments rather than physical delivery of the commodity.
But it has historically been difficult for a rival futures exchange to enter a market already controlled by an incumbent because there is no simple mechanism for traders in the established exchange to shift their activity over to the new marketplace.
In the first six months of 2019, about 4.5 million contracts changed hands at NFX, down 65% from the same period a year earlier, according to data from FIA, an industry group.
By comparison, CME's energy-focused subsidiary -- -the New York Mercantile Exchange -- had total volume of 303 million contracts in the first half of 2019, down 11% from the year-ago period.
"Nasdaq entered the U.S. futures marketplace in response to clients who wanted to develop new ways to innovate around energy and freight trading, " Kevin Kennedy, senior vice president of North American market services at Nasdaq, said in the statement.
"After evaluating the steady progress we made to expand our client base and grow open interest, the next step forward is for EEX and Nodal to continue this mission," he added, referring to EEX's U.S. unit, Nodal Exchange.
The NFX sale is the latest move by Nasdaq CEO Adena Friedman to exit underperforming businesses launched by her longtime predecessor, Mr. Greifeld. Ms. Friedman, who became CEO in January 2017, has been pivoting Nasdaq from running markets to more profitable businesses in data and technology.
Nasdaq at one point explored the possibility of launching bitcoin futures on NFX, but never carried out the plan.
EEX Group, which owns several European exchanges, has been building out its global presence in recent years. In 2017, it acquired Nodal Exchange, a U.S. futures exchange specializing in electricity.
Nodal, which handles about 44% of the U.S. power futures market, will acquire NFX's electricity and U.S. natural gas futures businesses as part of the deal.
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