With the futures industry across Europe embracing electronic trading, it’s only natural for members of Chicago’s open-outcry exchanges to wonder if their livelihoods are in jeopardy.
At the Chicago Mercantile Exchange, a definitive answer is at least six months away.
To chart its future, the Merc is banking on a strategic analysis by newly hired consultants McKinsey & Co. The study is due at year-end.
Some members think that’s too slow. As one put it: “The board doesn’t understand the necessity for moving fast.”
Not so, countered Chairman Scott Gordon. Board members are “going as quickly as we can” in formulating a strategic plan, he said last week. “I don’t think we’re supposed to do things to make it look like we’re doing things.”
McKinsey is charged with figuring out how the Merc can streamline decision-making, whether it should turn for-profit and how it should direct product-development and technology resources.
“By the end of the year, we’re going to have a better idea of what we’re going to look like . . . in three to five years,” Gordon said.
Still, a separate deadline looms: By June 19, the Merc and Chicago Board of Trade expect to reach a definitive agreement on merging their trade-clearing systems.
Members of both exchanges will be asked to ratify the deal within 90 days.
So what if the consultants determine the Merc should keep its clearing system independent? That won’t happen, Gordon explained: “Common clearing fits in with any strategic direction we take.”
Moving forward? By agreeing last week to register its computer operators as floor brokers, the proposed Cantor Financial Futures Exchange made a key concession that could hasten its regulatory approval.
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Cantor’s application for computerized trading of Treasury futures was put back on a fast track last week at the Commodity Futures Trading Commission, less than three weeks after being derailed.
Now, the CFTC has at most eight months to consider the Cantor proposal.
At the New York Cotton Exchange, a partner in the venture with New York trading firm Cantor Fitzgerald, President Joe O’Neill believes approval could come much sooner.
O’Neill has backed off his prediction that the system would begin trading in mid-June–just barely: “It’s pushed back a little bit past that, but probably not much.”
At the Board of Trade, which would be Cantor’s primary competitor, Chairman Patrick Arbor isn’t holding his breath, predicting: “It’s going to take time.”
Overseas trend: Although computerized futures trading is meeting resistance in the United States, it’s racing ahead overseas.
Beginning Tuesday, the Matif in Paris will trade all its interest-rate futures through its electronic system.
Since the system began operation alongside open-outcry trading April 7, more than 90 percent of trades in major contracts have been executed electronically.
Matif will bid adieu to trading pits entirely for its interest-rate contracts in September at the latest, when trading of options on futures shifts entirely to the screen from the open-outcry floor.
Meantime, the world’s biggest futures exchange after the Board of Trade may be saying goodbye to the pits.
The London International Financial Futures Exchange said last week it will speed up introduction of its electronic trading system by six months, to the second quarter of next year.
In addition, it scheduled a June 9 vote to change its structure and become for-profit. It would allow non-members direct access to exchange contracts traded on the screen.