Chicago exchanges train pit dealers on screens
Reuters, 08.06.03, 10:22 AM ET
By Kyle Peterson
CHICAGO (Reuters) - A wave of new technology in the futures and options industry has forced Chicago's exchanges to rush to prepare their floor traders for life in a point-and-click world, now that about half the volume on the exchanges is transacted electronically.
At the Chicago Mercantile Exchange, the largest U.S. futures mart, traders soon will be able to hone their skills in an on-line trading arcade that simulates real screen-based trading.
The goal of the Electronic Trading Resource Center will be to acquaint dealers steeped in the noisy, collaborative "open outcry" tradition of floor trading with the largely silent, often solitary world of on-line trading.
"You need to retool your senses," said CME Vice Chairman Jim Oliff. "Some of the things that open outcry traders might have keyed off of don't necessarily readily exist in the electronic environment."
Oliff said the CME hopes to open the resource center near the lower trading floor in December. The exchange also will kick off two courses to teach pit traders to use Globex, an electronic trading platform.
"Many customers appreciate the benefits of electronic. They get quicker execution. They have direct control of the order," he said. "Customers have a true choice. (But) many still prefer open outcry because of the information flow."
Electronic trading volumes at both the CME and the Chicago Board of Trade, the second largest U.S. futures exchange, is running neck and neck with pit trading volume.
CME data shows that 49 percent of its total July volume was on the electronic trading platform, Globex. That compares with 38 percent in July 2002.
At the CBOT, 55 percent of total July trading volume was electronic, including 81 percent in financial futures. In July 2002, 41 percent of total volume was electronic.
Leaders of both exchanges have said repeatedly that despite warnings from some market watchers who said the days of pit trade are numbered, they intend to make pits available as long as the membership demands it.
But even while carrying the open outcry torch, Chicago exchange officials are well aware that survival depends on cutting-edge screen-based trading and a membership that knows how to do it. CBOT traders now may enroll in courses with a new emphasis on screen-based trade.
"We're fairly aggressive when it comes to the training programs," said Robert Ray, senior vice president of CBOT business development. "It clearly is a trend, one that needs to be embraced, not fought."
Some market watchers see an imperative for Chicago exchanges to nudge traders toward their electronic platforms.
The U.S. derivatives industry is bracing for new competition from Swiss-German exchange Eurex, which has said it will open a U.S. derivatives exchange next year. The all-electronic Eurex is the world's largest futures exchange and deemed by many to be a formidable threat to the Chicago exchanges.
Eurex's arrival may help hasten the migration of trading volume to screens from pits, but the trend has been evident for some time, said David Norman, director of market technology at the Illinois Institute of Technology in Chicago.
"Technology is to such a level now that it will over time take the place of the trading pits. I would suggest that within the next couple of years, electronic will be far more prevalent," Norman said.
CME and CBOT officials usually refuse to predict trading volumes, especially about pits versus screens. But leaders seem to agree that the growth spurt in electronic trading volume is far from over.
Copyright 2003, Reuters News Service |
