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.But nearly all of themare considering a change from a non-profit, member-owned structure toa for-profit entity with publicly traded stock.The shift toward electronictrading of stocks, futures, and options changes not only the manner of howthese instruments are traded but also the organization, governance, and fi-nances of the exchanges on which they are traded.At the Chicago Merc thistransformation is nearly completed.The fundamental reasons for this evolution are threefold: 1) Technologyis expensive.Large sums of money are necessary to transform the tradingfloor into an electronic state-of-the-art trading system, money that is mostlyavailable in public equity markets; 2) Competition has become fierce andpromises to get fiercer.Electronic Communication Networks (ECNs), anda growing number of electronic exchanges, as previously noted, have cre-ated a competitive environment which demands efficient decision-makingprocesses.Rules, procedures, and decisions based on an archaic systemof floor politics, committees, and establishment controls, cannot competein today s world where decisions demand instant recognition and must bebased solely on competitive considerations.Only the lean and mean willsurvive; 3) Electronic trading leads to  disintermediation. With electronictrading, many of the middlemen essential to the operation of an exchangefloor will play a much different role.Historically, intermediaries brokeragefirms, floor brokers, and market makers owned seats on exchanges eitherto protect their competitive positions or as a source of specialized income.Electronic exchanges and the Internet change all that and will offer the mar-ketplace to a much larger universe of participants many of whom will gaindirect access, taking the place of the former intermediary whose function isbound to shift.Already futures traders have learned to trade by way of thescreen.Electronic trading rooms may be the wave of the future.Recently Banking Committee Chairman Phil Gramm issued an invitationto a May 8, 2000 hearing on the regulation of derivative markets and askedthe key question that Congress and the regulators need to address,  Whatregulatory and market structures would enhance the value of our markets?The Chicago Mercantile Exchange has offered testimony which providesmuch of the answer.By way of historical context, the CME, in juxtaposition to other Americanmarkets and contrary to the broad brush of condemnation used in theChicago Tribune editorial,3 anticipated the impact of advances in informa-tion technology.In 1972, we initiated the idea of financial futures.A decadeor so later, our Globex concept first introduced the world to the idea of elec-tronic trading in futures.We spent years negotiating with foreign regulatorsto secure access to offshore markets.We spent tens of millions rewriting ourclearing system, making it the standard for the industry.We consistently up-dated our contracts to reflect new competitive realities.We used technologyP1: OTA/XYZ P2: ABCc19 JWBT139-Melamed June 25, 2009 13:15 Printer Name: Courier WestfordChicago Futures in the Twenty-First Century 185to expand the capacity of our existing trading floor.Sadly, the CME too fora long time lost precious ground in a fierce tug-of-war between the cer-tainty of an open-outcry past and the insecurity of a technological future.Nevertheless, about two years ago the process righted itself and we beganreshaping the corporate structure of the Merc to a for-profit composition.We expect to be the first American exchange to achieve this objective.In the regulatory realm, our goal was and remains equivalent regulatorytreatment for functionally equivalent execution facilities, clearinghouses andintermediaries.U.S.regulated futures exchanges suffer compared to offshorecompetitors and the domestic OTC market.Overly detailed regulation offutures exchanges increases direct costs and time to market of innovativeproducts.We support relief for the OTC market, we support opening ourmarkets to foreign competitors, but we cannot support a package that givesrelief to one segment of the derivative market at the expense of domesticexchanges.We have proposed a holistic approach to regulatory reform thatwill bring legal certainty to the OTC market, relief to exchange markets andresolve the Shad-Johnson restriction.But the hour is late.If the clock strikes midnight before the futuresmarkets of Chicago the very entities that created financial futures do notcomplete their modernization agenda or are not allowed to compete equallywith every other derivatives counterpart, whether foreign or domestic, thenthe Chicago Tribune will indeed be proven right.4 I pray not.P1: OTA/XYZ P2: ABCc19 JWBT139-Melamed June 25, 2009 13:15 Printer Name: Courier WestfordP1: OTA/XYZ P2: ABCc20 JWBT139-Melamed June 25, 2009 13:16 Printer Name: Courier WestfordCHAPTER20Merton Miller, 1923 2000t was love at first sight I m not speaking of Merton Miller s love affairIwith Katherine; that is a private matter that needs no public review.I amspeaking of Merton Miller s love affair with financial futures.Indeed, from the moment back in May of 1972 when financial futureswere launched with the opening of the International Monetary Market, theIMM, to the day he left the Merc s boardroom for the ultimate futures marketin the great beyond, Merton Miller remained passionately in love with ourmarkets.So enamored was he with the IMM that in 1986 he unabashedlynominated financial futures as  the most significant financial innovation ofthe last twenty years.He was fond of saying that if one of Rip Van Winkle s descendantsfell asleep in 1970 and awoke two decades later, he would not be ableto grasp what had happened in financial markets.In Merton s words:  Sorapid has been the pace of innovation in financial instruments over thepast 20 years that nothing could have prepared him to understand themyriad of innovations, from eurodollars to swaptions. Merton embracedthese instruments as if they were members of his personal family.In asense they were.All the more reason Merton found it so exasperating that someone hadto come to their defense. Futures markets get no respect, he would sayin Rodney Dangerfield fashion, and proceeded to do battle for their honor.This became his mission, his personal crusade, his academic assignment,his raison d etre.He even found it objectionable that our markets were called derivatives. What are we, second-class citizens? he would ask rhetorically. Why arewe not considered the real markets? he demanded [ Pobierz całość w formacie PDF ]