In the first half of the 1990s, Fimat Banque had a seemingly unlimited appetite for the futures business.
Hiring like mad, the Paris-based bank expanded its listed-derivatives arm from 360 employees in 1991 to 1,200 in 1995, including more than 100 in Chicago.
Then the bellyache set in, forcing Fimat onto a diet. In the last two years or so, its futures operations have lost a couple of hundred employees.
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In the Pacific Rim, as Chairman and chief executive Brian Kaye conceded in an interview last week, “There’s been a lot of blood.” His Singapore office shrank to 22 from 81, Sydney fell to about 20 from 45, Japan was cut to 35 from 60 and Taiwan closed altogether, he said.
Yet Kaye is taking it all in stride. Those ups and downs are part of building a global business, he contended.
And for U.S. firms that hesitated to move abroad, fearing the inevitable downdrafts, the best opportunity to become a global player largely has passed, he said.
The winners, in Kaye’s view: European firms such as Carr Futures, Deutsche Bank, ABN AMRO and, naturally, Fimat. “American corporations missed the boat,” he asserted.
To be sure, American corporations probably are thrilled about missing the boat to Asia that Kaye jumped on so enthusiastically. But they also missed the metals business in London that’s making money for him hand-over-fist and the electronic trading in Frankfurt that could well determine the industry’s future, he said.
Now, Kaye wants to fill the few missing links in his operation– obtaining a presence in the Chicago Mercantile Exchange stock-index pits is a “must-do,” he said. He might not be starving, but his appetite is slowly recovering.
Futures’ future? By year-end, the Cantor Financial Futures Exchange could be offering U.S. Treasury futures in direct competition with the Chicago Board of Trade.
But what if no one makes the switch?
Although Cantor’s plan to launch its electronic marketplace has plainly frightened Board of Trade members, it still has a long way to go before it renders the bond pit obsolete.
The nation’s primary dealers, and most other top users of Treasury futures, haven’t broadcast any plans to shift all their business to Cantor’s startup.
Still, in letters to the Commodity Futures Trading Commission, a few firms have made a case for Cantor that turns on the virtues of electronic trading.
By operating entirely on a computer screen, the proposed Cantor exchange “enhances the regulatory environment, improves the financial integrity of the clearing process and, most importantly, allows the trading of futures products to become more competitive and economically efficient,” wrote Peter Karpen, managing member at Diversified Investment Management in Connecticut.
At High View Capital of New York, Chairman Peter J. Powers praised “the auditing capabilities of electronic trading.” And at Trendstat Capital Management in Arizona, President Peter Mauthe told the commission, “The more automation that is brought into the trade execution process, the fewer trade errors will occur, speed of execution will increase, costs of execution will decline and information on the markets’ liquidity will be more readily and widely available.”
Goodwill hunting: The plan to combine trade-clearing operations at Chicago’s futures exchanges would save trading firms $35 million over the next five years, the Futures Industry Association has estimated.
Indirect savings, through risk-management efficiencies and standardized procedures, could reach $80 million over a five-year period, the trade group said.
Although those savings might sound paltry when spread across an entire industry, common clearing also would give the Merc and Board of Trade a big intangible: the goodwill of trading firms just as alternative, electronic markets such as Cantor’s are expected to come on line.