The Commodity Futures Trading Commission’s no-action letter issued in 1996 to Eurex Deutschland ranks among the federal regulator’s biggest giveaways.
Alone among foreign bourses, the fast-growing, all-electronic exchange–until recently known as DTB–received special dispensation to roll out its terminals in the U.S. (The French Matif sneaks in through the Chicago Mercantile Exchange’s Globex system.) Today, Eurex Deutschland’s 17 stateside members generate an important part of its volume.
Now, the CFTC is trying to level the playing field for all foreign exchanges that want terminals in the U.S.–not to mention U.S. exchanges that want their screens overseas.
The commission intends to impose regulations governing foreign terminals by early next year, said Michael Greenberger, head of the CFTC’s trading and markets division, who spoke in Chicago last week. This could be a defining moment for a regulator that gets little respect among industry bigwigs.
One of the greatest advantages of electronic trading is its ability to provide market access across borders. Electronic exchanges are easy to link, so it is conceivable that all financial futures might trade on a single screen someday.
As Greenberger said, “This raises many questions about a global futures market.”
So if Eurex Deutschland and its competitors want to expand in the U.S., should they have to register as a U.S. contract market? Naturally, most foreign exchanges would prefer a less onerous level of regulation.
But the CFTC must ensure that each exchange’s technology protects investors, and that U.S. customers have redress if “something goes wrong,” Greenberger said.
Watch for a debate so contentious that it might prompt the commission to defer its rulemaking–and thereby preserve the DTB’s edge.
Floored: The London International Financial Futures Exchange has taken yet another step that makes Chicagoans nervous.
Even as Chicago Board of Trade directors were approving a proposal last week to list their flagship Treasury futures on a screen during daytime hours, LIFFE directors were scrapping a plan to build a trading floor in London.
With its leading financial-futures contracts shifting to an electronic-trading platform by the middle of next year, LIFFE has no need for a big, expensive open-outcry trading floor, explained Brian Williamson, its new chairman.
LIFFE’s decision to sell its Spitalfields site has ominous implications for the Board of Trade, which just built a financial-futures trading floor at a reported cost of $182 million.
Williamson, however, is too politic to point out those implications. “I have no means of judging that,” he said. “I’m always impressed with Chicago’s ability to buck the trend.”
Seat belt: One trend that appears to be gathering momentum is the decline in membership seat prices at Chicago’s major exchanges. Under pressure from electronic trading and cutbacks at member firms, hundreds of millions of dollars in equity has vanished over the last year.
At the Board of Trade, a full membership sold Monday for $409,000, down from a record $857,500 last year. An associate membership, which confers the right to trade financial but not agricultural products at the exchange, sold Monday for $126,000, down from last year’s record $575,000.
More Top Picks Best Telescope Filters For Moon Viewing
Prices were falling across Van Buren Street, too. A Chicago Board Options Exchange membership sold Friday for $430,000, down from $750,000 March 11.
Bringing up the rear once again, a full Merc membership sold Monday for $280,000, less than one-third of 1994’s record, $925,000.
A Merc International Monetary Market seat, which permits trading of financial contracts only, sold Monday for $180,000, about one-fifth of 1994’s $850,000 peak.