Associated Feature:CME Boosts Globex's Capacity for CBOT Products and Speeds Up Data
Less than six months after completing the historic merger between Chicago Mercantile Exchange Holdings and its former rival CBOT Holdings in July, the new CME Group is about to move all of its asset classes onto a single electronic trading platform. While the CBOT is best known for futures and options on agricultural products, and Treasury notes and T-bills, the CME dominates futures and options on futures on currencies, Eurodollars and stock indexes.
Over the course of two weekends in January, CME will migrate the electronically traded CBOT products to the CME Globex electronic trading platform, whose capacity has been expanded to accommodate the increase in volume, according to Kevin Kometer, deputy CIO at CME Group. And in a sign that the future of open-outcry trading could be waning, CME will consolidate the two trading floors into one by moving all of the floor-traded products over to the CBOT's 60,000-square-foot trading floor on Jackson Blvd. during the second quarter of 2008.
"It's an enormous project," says Kometer, who is spearheading the technology migration for the mega derivatives exchange, which is estimated to have 85 percent of the market share in U.S. futures trading after fending off a competing takeover bid for CBOT from the InterContinental Exchange (ICE). After the CME-CBOT deal was announced on Oct. 17, 2006, the two legacy exchanges started planning for the merger as early as January 2007, so when ICE entered an unsolicited bid for CBOT in March, CME already had a head start. However, the bulk of the IT work was done in July, after the transaction closed, Kometer notes.
CME is splitting up the migration of agricultural, equities and financial products over two consecutive weekends. On the weekend of Jan. 14, plans are to go live with the equity and commodity products first, Kometer reports; the financials would go live the weekend of Jan. 27. All the CBOT electronically traded products will be moved to Globex, with the exception of CBOT metals, which will remain on the existing eCBOT system, Liffe Connect, until next year, Kometer says.
"They're doing a very good job of providing customer access," says Russ Wassendorf Jr., COO of Chicago-based PFGBEST.com, fomerly Peregrine Financial Group, an online broker that provides proprietary platforms for accessing futures, options, foreign exchange and alternative investment products. "Now that they will have the Board of Trade products out there, that gives them the full array of debt and stock instruments, bonds, notes and Eurodollars," he adds, noting that the CME group will have stock index futures on the Dow Jones Industrial Average, the S&P 500 and the Russell indexes.
The question is: What does the CME-CBOT technology migration mean for brokers that provide direct access to electronic trading for their customers, and what kind of IT changes will they need to make?
"Definitely, from the systems side, it will simplify things," asserts CME Group's Kometer. "Where customers' systems groups in the past had to deal with changes from two exchanges and different technology requirements from two exchanges, now, obviously, it will be one," the deputy CIO says. Customers that already trade at both exchanges will have small changes to make, according to Kometer. For example, they'll need to change their logic for Globex messaging. "New customers to Globex will obviously have to change their systems over to Globex," he says, but there aren't too many customers that will be new to the platform.