Newspaper article The Christian Science Monitor

US Exchanges Consolidate Their Futures

Newspaper article The Christian Science Monitor

US Exchanges Consolidate Their Futures

Article excerpt

FOLLOWING rapid growth in the late 1980s, the United States commodities and futures exchanges are taking a hard look at their day-to-day operations. They are exploring new products, cutting costs, seeking to be more competitive against overseas exchanges, and expanding their customer base.

These exchanges have "done quite well in recent years," reflecting in part large price movements in such commodities as oil and gold, says Hans Stoll, director of the Financial Markets Research Center at Vanderbilt University in Nashville. "But now the exchanges are at a bit of a crossroads as they scan the future."

Few totally new futures investment instruments have been introduced in the past few years, Mr. Stoll says. A number of exchanges are seeking to consolidate staff and trading operations, move to more modern offices, and offer other products, such as indexes on foreign equities.

Futures contracts, traded on futures exchanges, are contracts for the sale and delivery of a specified amount of a commodity at some future time, but not immediately. Several of the best-known US exchanges are located in Chicago, Minneapolis, and Kansas City, Mo.

New York is home to five major exchanges: the New York Mercantile Exchange, called the Merc, or Nymex; the Commodity Exchange, called Comex; the New York Cotton Exchange; the New York Future's Exchange, called NYFE; and the Coffee, Sugar, and Cocoa Exchange.

Now, the two largest New York exchanges - Nymex, which is the main exchange for oil and gas futures, and Comex, the leading exchange for gold futures - are talking of merging. Nymex is also considering a major financial restructuring, including a public stock offering, which would bring new revenues to exchange members. Member seats on Nymex have shot up in value as trading volume moved from 2.6 million contracts 10 years ago to more than 47 million in 1992. Seats are now worth more than $250,000, up from $35,000 two decades ago. The exchange is highly profitable.

Comex seats are worth about $80,000, up from $40,000 earlier this year. …

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