As a 5-year-old in 1963, Earl Combs IV remembers his father giving him an oversized trading jacket and taking him to meet the fellows in the bustling pits.
It was an introduction that would stick. “Chip,” as he’s known, is the fourth consecutive Earl Combs to hold a Chicago Board of Trade membership–a lineage that stretches back a century, to 1898.
For the Combses, Cashmans, Griffins, Uhlmanns and others, the Board of Trade’s 150th anniversary this month is personal.
The exchange likes to call them “trading families,” and to hear some tell it, they’re the city’s secret weapon against competitors who want to steal away the futures markets.
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“In Chicago, we grow and breed traders the way the Swiss grow bankers and the Italians grow designers,” said Board of Trade Chairman Patrick Arbor, whose son Michael followed him into the business. “The risk-management skills are passed on from generation to generation. Other parts of the world don’t have these deep, liquid markets.”
Inspired by its anniversary, the Board of Trade devoted two pages of its most recent annual report to a photo spread showing the fathers, sons, daughters, brothers, nephews, cousins and in-laws who make up a dozen of its families.
The history will continue, said Chip Combs, a soybean and grain trader, who intends to introduce his four children to the markets as they grow up.
Instead of the screaming and arm-waving of open outcry, though, Earl “Marty” Combs V, his oldest son, now 12, may well encounter electronic trading, his father said: “It’ll be a different scene.”
Still, Combs is certain the Board of Trade will endure in some form. “The history of our family here will mean nothing if we don’t adapt to the future,” he said. “I’m confident we will.”
LIFFE left: The London International Financial Futures Exchange is having its stiff upper lip put to the test by the all-electronic Deutsche Borse, which has taken over most of its German bund futures contract.
In recent days, prominent LIFFE director David Kyte resigned after a tumultuous board meeting. He’s said to have lashed out against LIFFE leaders Daniel Hodson and Jack Wigglesworth while trading the DTB’s bund futures on a laptop computer–the ultimate putdown.
The exchange faces a crucial vote in May on plans to develop an elaborate new computer trading system and to restructure its membership. LIFFE brass wants to operate an electronic trading system at the same time the open-outcry pits are in session, letting the market decide which method is best.
The outcome of that contest could be foreshadowed soon. The French Matif exchange has just started a similar experiment with simultaneous open-outcry and screen trading.
It’s no secret that Matif expects the screen to dominate. Electronic trading will “dramatically reduce our fees and be more competitive,” said Matif Chairman Gerard Pfauwadel. “Maybe we show the way.”
Getting out: It has become an article of faith in the futures industry: Unless the exchanges cut costs, trading firms will be driven out of business as their profits erode.
Last week, Chicago’s Northern Futures announced plans to transfer its clients to the First Options unit of Spear, Leeds & Kellogg, and go out of business effective June 30.
So is the Northern Trust unit the latest poster child for the cost-cutting cause? Not really, said David Ganis, its president.
Even as it heads for the exit, Northern Futures is profitable enough to justify its existence on a purely financial basis, he said. Trouble is, it never fit into the bank’s strategy.
“If you’re a uniquely profitable enigma, people tend to leave you alone,” explained Ganis, who intends to remain with the bank. “If you’re just normally profitable, people start (asking) . . . `Tell me again why we’re in this business?’ “
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