Even as the bull market in U.S. stocks continues to boost Chicago exchanges, the Frankfurt-based Eurex is pulling away as the world’s No. 1 derivatives exchange.
The all-electronic Eurex posted record volume of 33.8 million contracts in March, up 74 percent from March 1998. In the first quarter, volume soared to 83.7 million contracts from fewer than 50 million.
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The German government bond contract, known as the bund, traded 14 million, a record for listed futures, Eurex officials said. The strong performance seems to erase doubts about the ability of computer-based systems to handle large volumes.
Meantime, results were mixed at the open-outcry-based Chicago Board of Trade and Chicago Mercantile Exchange.
The Board of Trade reported March volume of 23.4 million contracts, down a fraction from the year-earlier month, as active markets in wheat and soybeans compensated for weakness in the benchmark U.S. Treasury bond. The exchange traded 69 million contracts in the first quarter, up 1.8 percent.
At the Merc, March volume rose 4.8 percent from a year earlier, to 19.6 million, while first-quarter volume fell 6.4 percent, to 50.9 million. Eurodollar trading slowed, and the Merc’s once-robust currency markets continued to erode.
But equity products were busier, led by the computer-based “E-Mini” version of the Standard & Poor’s 500 contract. The traditional, pit-traded S&P 500 turned in a relatively lackluster performance, while activity shot up in the Nasdaq 100 and other smaller indexes.
The Chicago Board Options Exchange prospered as the bull market rolled on. March volume of 20 million contracts was up 15.9 percent from March 1998, while first-quarter turnover topped 55 million, up from 47.7 million.
Index products lagged, with monthly volume inching down to 5.3 million contracts. Options on the Dow Jones industrial average accounted for just 269,430 contracts in March, down from 331,403 in the year-earlier month.
Nowhere has the bull market helped more than at the Chicago Stock Exchange, the tiny regional bourse that has cut its costs and overhauled its trading systems over the last few years. Share volume soared 49 percent in March, to more than 1 billion.
Parting shot: The lame-duck chairman of the Commodity Futures Trading Commission is raising doubts about the outlook for open-outcry trading and for the member-firms and brokers that stand between customers and the marketplace.
“Electronic trading systems are replacing floor trading at exchanges around the world,” Brooksley Born told Congress in testimony March 25, just three weeks before her term expires. “Customers increasingly will gain access to markets without having to trade through an intermediary.”
Instead of focusing on trading abuses in open-outcry markets, regulators may need to concentrate on system-capacity and security issues, she said. “The need for fitness standards and customer-protection measures . . . may become less important with greater direct access and diminished discretion associated with automated trading.”
Born pointed to the Cantor Financial Futures Exchange as a trendsetter. The Cantor exchange, which competes with the Board of Trade, is expected to introduce direct electronic access to its market Tuesday.
No word on Born’s replacement. As of Monday, her spokesman wouldn’t say when she plans to leave office.
CBOT’s Net option: Former CFTC Chairman Philip McBride Johnson, writing recently in a trade publication, says the Board of Trade’s decision to call off its alliance with Eurex could be a “brilliant” move.
In rejecting Eurex, The Board of Trade, “probably inadvertently,” he notes, left its options open for converting to an Internet-based trading system. That could be the wave of the future, he says.
“It may be time for exchange leaders to forge alliances with deep-pocket companies that are already in the cyberspace business,” he writes. Bill Gates, are you listening?