Exchange Markets Battle for Share Of World Trading In Futures, Options
THE same sort of rough and tumble that roils financial futures trading floors has spread to executive suites as the directors of the world's exchanges vie over the 24-hour futures trading market.
Two years ago, Reuters, a British news service, and two United States exchanges - the Chicago Board of Trade (CBOT) and the Chicago Mercantile Exchange (CME) - linked up electronically to form GLOBEX, an electronic trading system offering customers round-the-clock trading of options and futures.
But the movement toward expanding GLOBEX has hit a patch of flack. Some futures exchanges considering this worldwide ``seamless trading system'' have bridled when asked to give up autonomy and forsake go-it-alone, off-hours trading.
On May 17, for example, the world's third-largest futures and options exchange, the London International Financial Futures and Options Exchange, turned down an opportunity to join GLOBEX. LIFFE executives indicated that they found GLOBEX too restrictive. The trading system would have barred them from forming trading links with exchanges outside GLOBEX and from extending their own after-hours trading.
More disturbing to GLOBEX is the fact that one partner, the CBOT, voiced the same criticisms of GLOBEX a month earlier. The Chicago Board announced it was pulling out of GLOBEX, and its last contract was traded there on May 20. The GLOBEX partners resisted plans by CBOT to go ahead with its own after-hours trading system, which it dubbed ``Project A.'' Project A is ``a competitor to GLOBEX, so how do you expect other participants in GLOBEX to view that?,'' asks Andy Yemma, a CME spokesman.
THE CBOT says it is merely trying to take advantage of rapid market growth. ``Basically, this is such a crucial time for the futures industry - we're growing so fast - no one really knows which way the industry is going, so you don't want to be strapped'' by a rigid regime, says CBOT spokesman Andrew Maner. April volume on the CBOT was up 52.5 percent over April 1993.
The day it withdrew from GLOBEX, the CBOT announced that it had agreed, as part of ``Project A,'' to arrange for the trade of futures on the 37,000 terminals controlled by Bloomberg Financial Markets. The LIFFE has also discussed a similar tie-up with Bloomberg, an information service based in New York.
All news is not bad news for GLOBEX. On May 19, Deutsche Terminborse (DTB), a German futures exchange, said it would join GLOBEX. The partnership is part of DTB's plan to strengthen ties to MATIF, the French futures exchange that scuttled its own after-hours trading and joined GLOBEX in March 1993. Still, the volume of 4,000 CME contracts each day at GLOBEX is far lower than the 25,000 projected by Reuters.
For its part, the CME has more modest expectations for GLOBEX, at least for the near future. ``We never made projections for GLOBEX, and we said it would take a long time for volume to build,'' Mr. Yemma says. The number of GLOBEX contracts has risen fourfold in the past year, he adds.