Membership seat prices at Chicago’s major exchanges are falling fast, pressured by the threat of electronic trading and impending consolidation.
At the Chicago Board of Trade, two full memberships sold Monday for $500,000 each, down from a record $857,500 last year. Associate memberships, which confer the right to trade financial but not agricultural products at the exchange, sold for as little as $231,000, down from last year’s record $575,000.
Prices were falling across Van Buren Street, too, largely because Board of Trade members can exercise the right to trade at the Chicago Board Options Exchange. A CBOE membership sold Monday for as little as $440,000, down from $750,000 March 11–a $100,000-per-month decline.
But even those drops can’t match the depression at the Chicago Mercantile Exchange. A full Merc membership sold Monday for $325,000, down $60,000 from its last sale on May 11, and nowhere near the 1994 record of $925,000.
A Merc International Monetary Market seat, which permits trading of financial contracts only, sold Friday for $210,000. That’s down from $305,000 on May 15, and far off the 1994 peak of $850,000.
Humanitarian considerations aside, now would be a handy moment for a drought in the Grain Belt to boost price volatility and an international crisis or two to jazz up the interest-rate markets and perk up seat prices.
Philly dogged: Just like some of the options it trades, the Philadelphia Stock Exchange may be at risk of expiring worthless.
In announcing a takeover bid for the exchange last week, CBOE brass left their members with the impression that Philly is bleeding so fast, its capital won’t last a year. Its systems and facilities, too, are far behind.
But some Philly members paint a much brighter picture. “Philly has a solvable problem,” said Chicagoan Paul Liang, a merger opponent whose investment firm owns 56, or more than 10 percent, of the exchange’s 505 seats.
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Yet, to some, the bid shows how far Philly has fallen. The CBOE is offering to pay the exchange’s moving expenses, plus award each Philly member a trading permit that in five years would–you guessed it–expire worthless.
Five years ago, the CBOE offered a lot more: limited trading rights plus $64 million. Philly directors turned down the deal. The latest terms have inspired talk that the CBOE would use a rejection as a pretext to list options on Dell Computer and other top Philly products.
As the dominant options player, the CBOE is well-equipped to win a multiple-listing war.
Regulatory front: Merc and Board of Trade representatives head to Washington Wednesday for congressional hearings on a Commodity Futures Trading Commission bid to regulate over-the-counter derivatives markets.
A recent CFTC trial balloon on the topic provoked an outcry from securities industry representatives, who worry that the threat of more regulation could drive even more OTC business offshore.
Meantime, the Board of Trade’s complaints about the proposed Cantor Financial Futures Exchange are being echoed in letters to the CFTC from Congress.
Twenty of 22 members in the Illinois delegation signed a letter to raise “conflict of interest, anti-competitive, fitness and public-interest concerns.” In addition, four Democratic leaders of the Senate Agriculture Committee said they’re worried about “customer protection, open and competitive trading and market integrity” on the proposed computerized exchange.
Cantor might be able to knock off the CBOT’s Treasury contracts someday, but it has a long way to go to match the exchange’s record of generous–and apparently effective–campaign contributions.