'Open outcry' works well and cheaply

Article Abstract:

The present system of calling out bids in the futures trading pits is an acceptable method that does not promote abuses by the traders. Computerized trading systems are too expensive and should not replace the pit system. The Chicago Mercantile Exchange has a contract volume of 220 million, a number that has risen every year since financial futures were introduced in 1972. If electronic trading is to compete with the pit system, it should offer better transactions at lower costs. The Chicago exchanges charge 20 to 50 cents per contract; the semi-automated system Tokyo International Financial Futures Exchange recommends commissions two and three times higher. Globex, the system recommended for the Chicago Mercantile Exchange is not as cost-effective as the pit system. It is not recommended that an inferior system replace a system that works.

Evaluation, column

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Computers spell change in the pits

Article Abstract:

Four securities traders at the Chicago Mercantile Exchange and five at the Chicago Board of Trade are using hand-held computers that register their transactions on a remote system. The system enables the exchange staff to keep track of and match trades as they occur. The move to hand-held computers is due to an investigation by the FBI that uncovered transaction manipulation by dozens of traders. A lack of documentation and oversight contributed to this illegal practice. The computers are also a solution to legislation pending in Congress that would require the exchanges of audit trades to be completed within a few minutes. Hand-held computers would also help traders compete with foreign markets more effectively.

Usage, Hand-held computers, Handheld computers, Wireless LANs, Securities industry, Product introduction, Commodity brokers, Board of Trade of the City of Chicago Inc., Legal Issues, New Technique, Wireless Network

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Automate the Futures exchanges

Article Abstract:

Futures exchanges such as the Chicago Mercantile Exchange should be automated with an electronic system that leaves an audit trail to reduce trading abuse. Such a system, the Swiss Options and Financial Futures Exchange (Soffex) was introduced in 1988. Soffex allows for trading of futures and automatically keeps records of the transactions. Soffex has been in use since its introduction, and although the Swiss market is smaller than the US, it still enables observation on how the system works. Soffex is somewhat slow, a problem that is being addressed by the Swiss exchange. Electronic trading does not preclude abuse by traders; it does, however, make it more difficult to perform and much easier to trace.

Swiss Options and Financial Futures Exchange

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