CBOT rejects calls for single trading system
By Jeremy Grant in Detroit
Financial Times; Jul 17, 2002
The Chicago Board of Trade yesterday rejected calls for it to develop a single electronic trading platform in the wake of the collapse of its joint venture with Eurex, saying it could relyon a mixture of different trading systems to meet rising demand forelectronic trading.
The revelation is likelyto disappoint those in the trading community who had been hoping CBOT would move to establish a replacement trading platform in the wake of the failure of its a/c/e electronic trading joint venture.
It appears to signal the determination of the CBOT to continue pursuing a "middle way" between full adoption of electronic trading and the preservation of traditional open outcry trading.
David Vitale, chief executive, said the CBOT would make "mixed use" of various systems. The board might continue to lease the a/c/e trading platform after a new agreement, reached with Eurex last week, expires in 2004.
"There's nothing to say that this [new a/c/e alliance] won't continue beyond 2004," he said. "We will clearly have an electronic platform, post 2004, and for fixed income [products] it could well be a/c/e."
He also said the CBOT was in advanced talks with the Chicago Board Options Exchange about using its electronic platform, known as CBOE Direct, to make electronic improvements to the CBOT's open outcry trading pits.
The CBOT and Eurex last week replaced their two-year a/c/e venture with an alliance that provides for Eurex to assume ownership of a/c/e, with the board becoming a licensee.
The joint venture had been dogged by disagreements over future investments in the system. It also imposed restrictions on each exchange's ability to trade certain products.
However many in the trading community believe the collapse of the original a/c/e arrangement, as well as the dramatic growth in electronically-routed futures trades in Chicago in recent weeks, only adds to the urgency for the CBOT to adopt a replacement electronic platform.
Russ Wasendorf, chief executive of Peregrine Financial Group, said continuing to lease from Eurex would take control of costs out of the CBOT's hands. It would also prevent the CBOT from providing certain levels of customer service.
"It has always seemed crazy to me to lease a service from a competitor. For them to lease from their competitor . . . reduces their ability to compete."
Some have speculated that the CBOT might consider CBOE Direct as a platform. It will shortly be used as the system for single stock futures trading by OneChicago, a joint venture in which the CBOT and CBOE are partners.
Mr Vitale said current talks were focused on looking at CBOE Direct as a "core piece of technology to electronify our floor trading". About 60 per cent of the CBOT's financial futures products are traded electronically. CBOE Direct would help shorten the time it took for trades to be confirmed. |
