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Strategies & Market Trends : CME Demutualization-- What's the play?
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To: Tony who wrote ()1/31/2000 11:42:00 AM
From: LPS5  Read Replies (1) of 4
 
Tony,

Here's how I break it down:

1. The CME is demutualizing, thereby opening it up to increased competition.

2. If we follow the example from the equities markets, the increased competition - mostly electronic - will be lower cost and more efficient, thereby attracting liquidity.

3. It seems likely to me that as a result of this, there will be increased retail interest, and subsequently participation, on top of the existing institutional hedging and speculating interest. Liquidity attracts liquidity.

4. Therefore:

With lots of new participants coming in, I'd look to my "increased volatility playbook" for the futures leg of this trade: I'd put together some long straddles in the near term contracts, in whatever vehicle is opened to electronic trading access first.

On the equities leg, that development would probably bode long and strong, at least initially, for:
1) online brokers as a new source of revenue; and,
2) some of the consumer non-durable companies that might save costs in being able to hedge their own inventory w/o the brokerage costs.

Thats my opinion. Anyone else?

LPS5
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