Merc Computer Trading Favored : Staff Urges Futures Regulators to Allow Globex System
The Chicago Mercantile Exchange moved a step closer Wednesday to gaining federal approval of its proposed computerized trading system called Globex.
The staff of the Commodity Futures Trading Commission officially recommended that the agency approve Globex, which is the first effort by a major U.S. exchange to allow its futures or option contracts to be traded away from the traditional trading pit.
Trading pits and the open-outcry system, used at each of the 10 main U.S. futures exchanges, have recently come under scrutiny in connection with an investigation by the U.S. attorney in Chicago and the FBI into alleged trading abuses at the Merc and its cross-town rival, the Board of Trade.
The five-person CFTC, which polices futures exchanges, is expected to adopt the staff recommendation and approve Globex at a meeting set for this morning.
The Merc is developing Globex with Reuters Holdings PLC, which would provide the computer technology for the trading system.
Merc officials have said they hope to launch Globex in the autumn. Initially Globex trading would be limited to the Merc’s currency, Treasury bill and gold futures contracts. But the exchange hopes eventually to offer all its futures and options contracts on the system.
Could Trade Outside Hours
Globex would allow Merc members to trade outside regular trading hours, from 6 p.m. Chicago time to 6 a.m., Sunday through Thursday.
In its memorandum, the CFTC staff rejected an objection lodged last year by Knight-Ridder Business Information Systems, a Reuter competitor, that Reuters and its subscribers might have preferential access to information about Globex trading.
Globex market information, the CFTC staff said, will be distributed on an equal basis to all of the Merc’s quotation vendors.
The CFTC staff also rejected the Chicago Board of Trade’s claim that Globex would not ensure reliable price discovery because prices would not be arrived at through open outcry.
“The division believes that Globex trading would be open and competitive within the meaning of the (Commodity Exchange) Act and the commission’s regulations,” the memorandum said, referring to the federal statute governing futures.
The New York Mercantile Exchange, the world’s leading energy futures exchange, has agreed in principle to join Globex. The Commodity Exchange of New York, the most active metals futures market, is considering doing so.
