Just a year ago, when Heike Eckert of Deutsche Borse AG would pay marketing calls in Chicago, no one took her electronic exchange all that seriously.
“They said electronic trading doesn’t work,” Eckert recalled.
These days, DTB is making the skeptics take notice. In a sudden turnaround, the Frankfurt-based exchange is gaining ground in a key market-share battle against the open-outcry traders of the London International Financial Futures Exchange.
For years, LIFFE fended off DTB, retaining more than two-thirds of the volume in the hotly contested futures contract on the bund, the German government bond.
But in recent months, DTB bund volume has soared. Through July, its market share stood at 43.3 percent.
“That’s making people much more open-minded,” Eckert said. Not only does electronic trading work, but it’s cheaper and more efficient than open outcry, she maintained.
DTB’s new momentum has inspired it to open a four-person marketing and product-development office at 190 S. LaSalle St. Already, Chicago trading firms maintain two-dozen DTB terminals, which account for an estimated 10 percent of exchange volume, Eckert said.
For all the public bluster in favor of open outcry, DTB consultant Alex Lamb believes many Chicago traders secretly want screens. “People are more flexible privately than publicly in changing their habits,” he said.
LIFFE goes on: While DTB gains ground in the bund, LIFFE isn’t standing still.
The Londoners took a step toward defending their turf Aug. 20 by waiving bund trading fees for at least the next few months. DTB followed the move two days later.
Though a Chicago source said DTB has LIFFE executives “shaking in their boots,” a spokesman for the London exchange scoffed at the idea. LIFFE’s bund futures volume is up, too, even though its market share is falling.
And it’s still unrivaled as the primary market for bund options on futures, the spokesman said.
LIFFE’s bund fee cut is aimed partly at supporting the Sept. 18 reintroduction of bobl futures, a five-year German government debt contract.
LIFFE brass is hoping for a lively bund-bobl arbitrage. DTB’s market-leading bobl contract survived a previous LIFFE assault several years ago.
In addition, LIFFE is mulling a plan to scrap its open-outcry linkage with the Chicago Board of Trade and other exchanges, sources said.
After-hours trading of LIFFE’s bund futures and CBOT Treasury bonds may take place solely on an electronic system, the sources said.
LIFFE moved in that direction Friday, announcing it will “concentrate on the use of electronic methods” for after-hours trading. Its Euroyen contract is moving from pit trading onto LIFFE’s APT electronic trading system.
Membership exchange: The Chicago Board Options Exchange continues riding the wave of action in the stock market, A CBOE membership changed hands Thursday for a record $715,000.
On the other end of the spectrum, a Chicago Mercantile Exchange full membership sold Friday for $460,000, down from a record $925,000 in 1994.
On the button: Former CBOT Chairman Billy O’Connor faces an uphill struggle in his bid to scuttle a planned link between the exchange’s Chicago Board Brokerage subsidiary and OTC dealer Prebon Yamane.
Even if Tuesday’s membership vote goes against him, O’Connor has the satisfaction of having inspired the CBOT’s best lapel button of the year.
Exchange members in the corn pit and elsewhere were sporting “Prebon No” buttons last week, complete with an image of a downward-pointing thumb–all in green ink to honor O’Connor’s Irish roots.
