It’s no secret the Chicago Mercantile Exchange currency markets need help. In July alone, volume fell 11.3 percent from a year ago. Charles Minnaar of the rival New York Cotton Exchange thinks he knows what’s wrong.
The Merc has failed to keep pace with changes in the vast interbank currency markets. At heart, it isn’t customer friendly, said Minnaar, a former banking exec who now heads marketing at the Cotton Exchange, which trades currency futures through its Finex division.
Minnaar’s upstart currency contracts are booming even as the Merc’s shrink. Volume shot up 65 percent in July from the same month a year ago, and it’s up 29 percent this year over ’96. Admittedly, those gains come on a much smaller base than the Merc’s.
Why the difference? For one, Minnaar quotes prices the same way as the banks. He prices in deutsche marks per dollar, for instance, while the Merc prices in the reverse: dollars per mark. That makes the Finex markets more user-friendly for bigger players who don’t mind having profits and losses expressed in the foreign currency, Minnaar said.
On top of that, Finex contracts are bigger than the Merc’s, and there’s more of them. By offering almost double the number of currencies, Finex gives its customers what Minnaar terms “one-stop shopping.”
Also, Finex doesn’t charge a fee for exchange-for-physicals, over-the-counter transactions that can be used to transfer trading positions from the interbank market onto the exchange. The Merc, meantime, just raised its EFP fee.
“I don’t understand that. They’re missing the point,” said Minnaar. “You can’t draw a little sandbox and say, `You can only play in my sandbox.’ “
Beat goes on: The battle may be over, but the war of words is still on between Leslie Rosenthal and Karsten “Cash” Mahlmann.
The two ex-Chicago Board of Trade chairmen faced off in an exchange disciplinary hearing, with Rosenthal accusing Mahlmann of pirating key customers and employees. The CBOT panel, headed by Charles Wasserman, rejected Rosenthal’s claims.
So with that settled, have the two buried the hatchet? “Absolutely not,” said Rosenthal. “I wanted the industry to realize what type of a guy he was.”
Mahlmann, now working in London for Dutch bank ING, is “thrilled beyond words” at the outcome of his case, said his attorney, Jeffrey Cole of Chicago. “The only person who was defamed and demeaned by Rosenthal’s false charges was Rosenthal himself,” Cole said.
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New York, New York: The Chicago Board Options Exchange already is seeing a payback from its $5 million purchase of the New York Stock Exchange equity-options business.
Trading at the CBOE in a former employee cafeteria known as “the green room,” the Big Board options are fattening up nicely. Average daily volume has doubled, from about 14,000 contracts just before the April transfer to 28,490 in July.
A surging stock-market surely helped. But ex-NYSE traders also credit superior systems at the CBOE, a nod to the $2.5 million the exchange spent converting the “green room” into a state-of-the-art trading venue.
Meantime, CBOE officials were watching closely when the Merc voted last week to halve its Standard & Poor’s 500 stock-index futures contract.
The CBOE’s S&P 100, known as the “OEX,” is probably headed for a similar split by year’s end. Volume plunged 60 percent in July from the same month a year ago. So far in ’97, OEX trading is down by more than one-third. Surely, splitting the `O’ couldn’t make the trend any worse.