CBOE may launch futures exchange
Regulators review revived request
By Mark Skertic
Tribune staff reporter
Published July 26, 2003
The Chicago Board Options Exchange, which already owns a piece of a futures exchange, wants to start one of its own.
The exchange, the largest domestic market for equity options, has asked the Commodity Futures Trading Commission to revive a futures exchange application originally submitted in September 2002.
If approved, the CBOE could compete in an area already dominated by the Chicago Mercantile Exchange and the Chicago Board of Trade, the nation's two largest futures markets. It would also be entering a financial area where OneChicago LLC is working to get a toehold. The options exchange, the Merc and the Board of Trade jointly own OneChicago.
Those exchanges are girding themselves for the anticipated U.S. arrival of Eurex AG, the world's largest futures market.
The CBOE has not announced what futures products it would offer--or when.
"This is really just laying the groundwork," said spokesman Gary Compton. "It's for when we have an opportunity to do something."
The application was originally submitted in September 2002, and the exchange asked federal regulators to hold off on the review in December. It was revived June 9 at the exchange's request.
Reviews take 60 days, during which the trading commission staff reviews the application, said Duane Anderson of the commission's division of market oversight.
In March, the CBOE's chief executive, William Brodsky, said at a risk management conference that the CBOE planned to move forward with its effort to add a futures exchange.
Last November, OneChicago began trading. It deals in security futures with three products: futures on individual stocks, exchange-traded funds and narrow indexes.
Although it's possible the CBOE could enter those areas, there are other futures products it could develop that would prevent it from competing with an exchange it owns a piece of.
For example, some analysts noted, OneChicago's narrow indexes are indexes of five companies in specialized sectors, such as aerospace. It's possible that the CBOE might develop a similar index with more companies.
"The only thing I can see is they are going to trade futures on indices that futures don't already exist on and that there might be extra interest on," said Mitchell Zacks, vice president and director of research at Zacks Investment Management in Chicago. "There must be a niche of new indices that people are starting to concentrate on."
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