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World's money merchants make strides on round-the-clock trading

They had dreamed about the possibility for years, these traders who make a living - or go broke - speculating on the future relative values of the world's currencies.

When nobody adequately answered the question ''Why not?'' they began to get serious about their dream: round-the-clock trading, from the Midwest to the Far East to somewhere in Europe and back to the Midwest.

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The plan is that if a trader ends the day with his portfolio ''short'' (i.e., having sold more foreign bills than he actually has in possession) in, say, Chicago, he might still be ''long'' (holding excess currency) in Hong Kong. Around midnight, Chicago time, a trader can begin dealing with the London or Zurich exchanges. And when the 7:30 a.m. bell rings on the floor of the Chicago Mercantile Exchange, the trader can begin the cycle anew.

At least a third of the scenario is still a dream, but the garden-variety Wall Streeter of 10 years ago might be surprised to learn that two-thirds of the scenario is in place.

The Chicago Mercantile Exchange created the whole idea of currency futures a decade ago. That was the first step.

The second came Sept. 7 (the evening of Sept. 6 in Chicago), when the Merc linked trading operations under a ''mutual offset system'' with the Singapore International Monetary Exchange (SIMEX) and opened trading in deutsche mark and Eurodollar futures. Two months later it began offsetting trading for the Japanese yen.

A year ago SIMEX was a tiny marketplace called the Gold Exchange of Singapore. But the Merc selected it because (1) it was eager to grant trading privileges to insomniac Americans in return for access to the Merc's sea of liquidity and (2) Tokyo and Hong Kong had restricted themselves out of consideration.

Now that Phase 2 is operational, however, talk of a European link has been surprisingly muted - at least any talk from Leo Melamed, special counsel for the Merc and its acknowledged spark plug.

''Singapore is off to a good start,'' he said in a recent interview. ''Everything's 'go' and doing great. What we're cautious about is future expansion.''

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A year ago, expansion meant a potential pact with the London International Financial Futures Exchange, which was also reported to be in consultation with New York's Comex.

''We're still the only ones who have made a commitment, who have actually gone out there and done it,'' Mr. Melamed said. ''The (Chicago) Board of Trade has been talking about cooperative links with entities in London and Japan, and the New York Stock Exchange has talked about instituting a 24-hour trading clock. But mostly what other exchanges have been talking about is margin accommodation, and that's only part of the answer. That's only part of a complete mutual offset system.''

Melamed said that any decision on a European link would not be made until next fall. Merc officers want to see the Singapore link in action for a year before deciding about expansion to European time zones. The existing link has yet to be tested during a busy cycle.

''We're looking to see how it will do during a normally active cycle, like the first quarter of next year,'' Melamed said. At a recent meeting in New York with about 20 futures firms, he says, five of them indicated they are already pursuing the SIMEX link.

The generally favorable reaction, he believes, stems from the smooth performance of the system so far - and that is attributed to the ''safe, simple methodology'' that was developed. Singapore trades that offset each other stay in Singapore; Chicago trades that offset each other stay in Chicago.

SIMEX also adopted practices that the Commodity Futures Trading Commission requires for US exchanges, such as financial segregation of customer accounts, common bonding, and the use of gross margins instead of net.

''There's evidence we're on the right track,'' Melamed said. ''The world is coming together and we're proving this can be done with cost efficiency. But when we measure how well we're doing, we need to be realistic. We don't need to be deluded by our own PR fluff.''

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