133-Year-Old Exchange Going Electronic133-Year-Old Exchange Going Electronic

Futures trading continues its evolution as a 133-year-old Chicago exchange folds. MidAmerica Commodity Exchange, which became part of the Chicago Board of Trade in 1986, will close by next June and cease floor trading. Its most active contracts, including agriculture, metals, and Euro futures, will be listed on a/c/e, the electronic platform CBOT launched last year in conjunction with Frankfurt's Eurex.

U.S. exchanges lag far behind Europe when it comes to embracing electronic trading, says Robert Iati, analyst with research firm TowerGroup. That's because modernizing European markets ran into less cultural resistance: "They had less history, so they had less to lose," he says, unlike some U.S. exchanges, where board seats have been handed down through families for generations. Also, many traders here believe electronic trading is a poor substitute for open-outcry pits when it comes to getting a feel for market dynamics, Iati says.

On the other side of the Atlantic, France's Matif exchange established an electronic system that paralleled its floor trading in the late '90s. It only took one month for the exchange to drop floor trading entirely, says Iati. "Here it takes years, and will continue to take years." Even CBOT, which is changing from a member-owned exchange to a for-profit organization, isn't going all out with a/c/e yet. Right now, a/c/e represents about 15% of the CBOT's futures volume, although it can be as high as 30% for certain contracts, a CBOT spokeswoman says.

Futures exchanges worldwide will spend more than $2 billion on IT by 2004, up from $1.2 billion in 2000, according to a survey from research firm TowerGroup and the Futures Industry Association.