Wednesday, March 12, 2008

 

My advice for the CBOT...in 1995



It is amazing what you can find when you start cleaning out your closets with the determination to go through every piece of paper and throw out the junk. This is my contribution to a newsletter put out by a group of independent traders and brokers many of whom had problems with the the way the Chicago Board of Trade was being run. This is my response to a letter from someone named John Tocks who wanted to place limits on the electronic trading system know as Project A. I was trading on Project A and doing well but I thought his fear of electronic trading was short sighted.

In September of 2000 the CBOT shut down Project A in favor of a partnership with the German exchange DTB amove which I vigorously opposed. In fact, we had successfully managed to stop the deal one time but the CBOT management was dead set on making the deal happen. It was a disaster draining the Board of finances and eliminating the Board's small group of programmers in favor of a agreement to lease a system that was older than Project A on terms that were unfavorable to the Board. Shortly after the CBOT and DTB made that deal the DTB announced that this was the first step in an eventual merger of the CBOT and DTB. We could thank the geniuses at Anderson Consulting for this debacle.

Now the CBOT is a subsidiary of the Chicago Mercantile Exchange. A fitting end to the stupid policies of the CBOT. There was a panic over electronic trading eliminating floor trading and the CBOT ended up in a horrible deal because of it. I wonder how much I contributed to this panic?

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