INTERVIEW
At The Start Of Our 20th Year, We Ask:
What Is The Future Of Trading?
The trading exchanges have been going through various changes lately,
shifting from member-sponsored entities to for-profit organizations. They
are also introducing more products, giving us a greater array to choose
from. What does this portend for the trading industry? To find out, STOCKS
& COMMODITIES Editor Jayanthi Gopalakrishnan spoke with Bob Fitzsimmons
of the Nasdaq LIFFE market, David Prosperi of the Chicago Board of Trade
(CBOT), and William J. Rainer of the joint venture of the Chicago Mercantile
Exchange (CME), the Chicago Board Options Exchange (CBOE), and the CBOT,
formally named OneChicago, LLC. Here's what they had to say.
"The fact that we don't have to support an open outcry
market allows us to be more streamlined and the fact that we're able to leverage off Nasdaq
and LIFFE will hopefully translate to a more streamlined organization."
Bob Fitzsimmons was most recently with Nasdaq's former parent, the
National Association of Securities Dealers. Prior to that, Fitzsimmons
was a managing director at Nomura Securities International, running its
futures business. He started the futures division for Nomura in 1990, and
within three years, the division was one of the top 20 futures commission
merchants (FCMS). Before joining Nomura, he was a broker in the Treasury
bond options pit for Kidder, Peabody & Co.
Fitzsimmons became a member of the CBOT in 1987, and was a member
of the CME. He was an active member participant on FCMcommittees at both
exchanges.
Since this issue starts off our 20th anniversary year, I wanted to
talk about some changes that are taking place in the exchanges and how
they're going to affect us in the future. The Nasdaq LIFFE market is a
relatively new market and offers traders a new product. Could you start
off by giving us background?
As you know, the Nasdaq LIFFE market is a new, highly capitalized, for-profit
company. We're trying to leverage off the relationships that Nasdaq would
have on the broker-dealer side, and the relationships the LIFFE would have
on the FCM side and their product expertise. When the Nasdaq hired me about
two and half years ago, they were looking at the futures business, and
they brought me in for that effort. We looked at a variety of systems and
venues for getting into this business, and we were intrigued by LIFFE and
the LIFFE-Connect system. Last March, we were able to finalize a deal with
Liffe. Nasdaq and LIFFE really don't compete in the same space, so that
makes them more complementary as opposed to competitive.
David Prosperi is the senior vice president and assistant to the
president at the CBOT. He is a member of the exchange's management committee,
and has management oversight responsibilities for the communications and
human resource functions at the exchange.
Prosperi joined the exchange in May 1990 as vice president of communications
before moving up to senior vice president of communications. In that role,
he was responsible for developing and implementing proactive strategies
for the exchange's media relations and corporate and community affairs
efforts, as well as serving as the primary spokesperson for the CBOT.
"We're working on becoming more of a product-driven organization. We're focusing on developing new products as well as what we can do to
strengthen our existing product mix."
Could you give me some idea of what the Chicago Board of Trade has
in mind to offer to traders in the future?
The Board of Trade is in the midst of restructuring into a for-profit
operation. We have our restructuring strategy before the SEC, and we're
hopeful they will approve it shortly. And should our membership approve
it, then it will require a favorable tax ruling from the Internal Revenue
Service that transferring from membership to shareholder is a nontaxable
event. Restructuring into a for-profit entity gives us a better opportunity
to operate in a businesslike environment at the Board of Trade, and allows
us to be more competitive, not only with exchanges like the CME, but our
foreign competition and the over-the-counter market as well. That's one
of the things that we are doing.
William Rainer served as chairman of the CFTC from August 1999 until
early 2001. Under his leadership, the CFTC embarked on unprecedented regulatory
reform, including support of the Commodity Futures Modernization Act of
2000, which allows the introduction of single-stock futures later this
year. Prior to his CFTC appointment, Rainer was chairman of the US Enrichment
Corp. from 1994 until 1998.
Rainer's securities industry experience includes having cofounded
Greenwich Capital Markets in 1981, where he served as managing director
of the firm until 1987. Earlier, he held positions at Kidder, Peabody &
Co., including manager of corporate bond trading and director of fixed-income
marketing.
"I don't think anybody knows for sure what will happen
if these instruments are successful."
Could you give us some background about the joint venture of the
Merc, the CBOE, and the CBOT?
Sure. Last May the three exchanges - Chicago Mercantile Exchange, Chicago
Board Options Exchange, and the Chicago Board of Trade - decided to pool
their resources to form an independent joint venture and provide the resources
necessary for the joint venture to become a regulated exchange, specializing
in the products legalized by the act, specifically single stocks and narrow-based
indexes.
...Continued in the January 2002 issue of Technical Analysis of STOCKS
& COMMODITIES
Excerpted from an article originally published in the January
2002 issue of Technical Analysis of STOCKS
& COMMODITIES magazine. All rights reserved. © Copyright
2001, Technical Analysis, Inc.
Return to January 2002 Contents
