Today we are pleased to inform you that the Chicago Board of Trade has signed a landmark agreement with the Chicago Mercantile Exchange in which the CME will provide clearing and related services for all CBOT®products, beginning on January 2, 2004. This agreement, which will be called the CME/CBOT Common Clearing Link, will provide all clearing firms and customers with operational, performance bond and capital efficiencies, as well as a combined risk capital pool and other cost savings. It is an historic agreement that is good for our customers and members, our clearing firms, our two exchanges, and the City of Chicago. This move cements Chicago's reputation as the risk management capital of the world. The overall business objective of the CBOT is to make our exchange a stronger and more competitive marketplace, building off our core values of transparency, liquidity, flexibility and market integrity. The CME/CBOT Common Clearing Link creates the opportunity for our exchange to continue to grow and to develop our marketplace by leveraging a strong partner in the CME, and by creating significant benefits for all clearing firms and market users. Our business model for 2004 will provide members and customers with the most dynamic front-end capability âvia the LIFFE CONNECT®à electronic trading platform -- together with the creativity and innovative practices of the CME's clearing operations. Our decision to align with the CME on clearing, which was unanimously approved by our Board of Directors, puts the CBOT in a much stronger competitive position. Not only will the CBOT benefit from this agreement in terms of innovative product development and distribution, this consolidation with the CME also will provide significant cost savings for all members, clearing firms and customers. The increased cost savings and efficiencies will result from interfacing with only one clearing system and one set of procedures and practices. There will be consolidation of internal operations and broader risk offsets for portfolios with CBOT/CME products. There will be netting of settlements and recognition of offsetting cash flows between exchange clearing houses, as well as streamlining allowable collateral types and rules. CBOT products would retain net margining while gaining the benefit of risk offsets between the CME and CBOT. With this historic agreement, we are driving more consolidation within our industry and delivering more value to market users. The CME/CBOT Common Clearing Link will take those market efficiencies to the next level by offering portfolio margining that takes into account positions at either exchange and reduces performance bond requirements accordingly. Our discussions with Terry Duffy, Leo Melamed and the entire CME leadership and staff were fruitful and demonstrative of the increasingly positive working relationship that exists between two of Chicago's finest and long-standing business enterprises. For the Chicago Board of Trade to be successful, we must continue to evolve and not just focus on the status quo. We must make business decisions that are in the best interests of our customers and members. By making these far-sighted choices we are allowing our exchange to grow its business and take advantage of the transparency, liquidity, flexibility and market integrity that attract customers to the Chicago Board of Trade every day Didn't I call this on ET on January 24? Of course it happened much faster then I expected. Watch for the rest of my prediction to come true.
I'll save you the trouble. He's saying that the Merc and the Board will merge and rule the world by kicking the snot out of Eurex. Fine. But then the delusion sets in... he prophesizes it will be accomplished in the Chicago pits, and goes on to say how the S&P pit locals will gobble up 1,000-lot orders at the bid or offer price. Reality: If the Merc and the Board merge, and then cut their electronic fees in half, then I agree they would keep Eurex at bay. But now the BOTCC is free to clear the Eurex U.S. trades, and Eurex will start listing U.S. products in 2004. And right now, I can trade Eurex Bunds for 1/3 the cost I can trade CBOT A/C/E or Pit Ten-Year Notes. If a U.S. dealer, fund, or independent can save that kind overhead the math isn't hard to do.
Bone, Is Eurex really going to start trading stuff like the emini S&P index and the 10 year notes in 2004? What will they be trading? And won't that split the liquidity pool if they do? It will really suck if futures become like stocks with routing and multiple exchanges with funky connections and best offer and all that BS.
Bone, you are sounding more and more everyday like a disgruntled trader. See here is the thing big guy. The only guys that come on these boards and complain about their fees are the guys that aren't hacking it. If fees are that burdensome to your bottom line I suggest you find another line of work. Also on that point, what is it to you anyway? I have read post after post after post about how much you hate the CBOT and the CME. Why? So f*cking what. You like the eurex products and you like trading the Bund. Good for you. But why bash other products, other platforms and other exchanges? See it makes no sense. That's like me trading the SP and bitching about the nasdaq futures. Or trading listed stocks and bitching about nasdaq stocks. Why don't you just stay in your world and be happy instead of complaining about other products that you don't even trade. You are like the guy on here that complains about how tough the market is but doesn't even trade. There are many many drawbacks to trading on eurex. Options for one suck. It's basically nothing but a crossing mechanism. All their option orders are done over the phone and then they cross them on the screen. The markets are old and they don't honor any size. There is no price discovery or transparency to speak of. As for eurex getting into indexes, good luck. Indexes are very hard to brand, very hard. Just ask Russell Sands over at the merc. The merc can't get any liquidity for the Russell 1000 or 2000. Why? Because they are not name branded like SP. So the eurex will have something like the Eurex 500 or something and you think people will trade that? No way. It will fade into the sunset. Bottom line is The merger between the CME and CBOT's clearing house is monumental. Especially for the little guy. Why? Because he can trade more product for less money. His margins will be reduced substantially and he can engage in far more lucrative spreads then he could before. Also his trading and clearing cost will be far less as well. And like I said before, I told you 3 months ago this would happen but you said no way. These two exchanges will never work together. Good call.
I trade 200,000 futures contracts a month. I trade Eurex, CBOT A/C/E, LIFFE, and Globex. I own seats at the Board and the Merc. So yeah, exchange fees do matter to me. Now, go and play with little Maverick.
See dude your losing me here. If the fees are too burdensome for you on cbot a/c/e and globex then here is a simple answer, don't trade them. Why not just trade eurex exclusively? See here is your problem. If you really want to take a stand, you need to stop using them altogethor, send a message to the CBOT and CME that you are getting treated better at eurex and send your order flow their way. If enough people do that then you know what, maybe somebody will do something. But apparently as much as you complain about it, it's not enough for you to quit using the cbot and cme. Now why is that? If you want change buddy, you have to initiate it, not complain on these boards and give everyone a headache. As long as you continue to send order flow to the cbot and cme you are telling them keep up the good work guys. Now I am still scratching my head as to what this post has to do with my original posting about the merging of the cbot and cme. Oh well. Why don't you make a post about how corrupt the eurex's otc option business is. Let's see how you spin that.
I appreciate your insight into this situation, Maverick, and I've enjoyed your posts. Don't feel like you have to respond to every hack that has something to say.........nice call.
If you had the choice of trading on the floor vs. screen based, which would you pick? Is being on the floor in an open outcry environment far better edge wise than the "sterile" environment of the screen? I am debating whether the floor edge is worth it-pain is the ass to apply 1.)$1,000 per month lease 2)NFA paperwork, 3)floor broker application costs of $1700. Any thoughts as to why it would be worth all that trouble and expense? Thanks