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Strategies & Market Trends : Canadian Options -- Ignore unavailable to you. Want to Upgrade?

To: marcos who wrote (1140)	6/7/1998 5:15:00 PM
From: Lilian Debray	Respond to of 1598

When I first read Porter's posts a few months back, it seemed to me that the issue on whether or not should be computerized was a dead one - the volume on the exchange being nothing like it was ten years ago, it only makes sense that it should be. A bit of historical background could help define other issues alluded to, such as the one you have particularly identified, the risks involved in such a market for large numbers of small investors: "How does the purpose of the investing public get served here? It doesn't." "He who pays the piper calls the tune." "Two steps down into the Pit [part one] This is the trading area of the Toronto Futures Exchange, a TSE-sponsored institution that is part casino, part insurance mart, part bear-pit. Its most notable architectural features are two circular indentations in the floor, each the size of a child's waddling pool. The traders stand around these pits, reading paper-back novels or watching the changing numbers on an overhead electronic quote-board. When they want to make a trade, they walk two steps down into the pit and call out their orders. Some of those traders are from the large banks or the large brokerage houses, such as Merrill Lynch, Wood Gundy and Richardson-Greenshields, whose commodity departments are becoming important profit-centres. A few others are professional stock traders from the other side of the wall. Although most stock traders ignore the futures pit because they don't understand it, a few have learned to use it to hedge their minute-by-minute bets on the stock market. Still other futures traders are known as "locals" because, when the TSE set up the TFE as a separate entity, it bought advertisements to invite people to become TFE members. Some 260 seats were sold at $6,500-$8,500 each, and about 25 of them were bought by individuals, including a secretary, a bus driver, several lawyers, an airline pilot, a Canadian Forces helicopter pilot and a real-estate salesman. These individual TFE members are trading for themselves, not for clients; and their function is to try to make a living by betting against the corporate hedgers, thus providing liquidity to the market. "Toronto is a thriving, commodity town," says Andrew Clademos, the TFE's secretary and general manager, "and most of that business is going to Chicago. If we took a portion of that business, and repatriated it, we would have a thriving exchange." [.] Bill Bell, a real-estate salesman who bought a seat and now spends most of his mornings buying and selling futures in the TFE pit, succinctly summarizes the risks of the game: "In real estate," he says,"if you have a bad year, you don't make any money. In this business, if you have a bad year you give a lot of your money back."" Alexander Ross - THE TRADERS - Inside Canada's Stock Markets - Collins Toronto, 1984. pp.110-111