International Finance and Financial Policy

By Hans R. Stoll | Go to book overview

24
Global Futures Trading Systems

WILLIAM J. BRODSKY

This chapter will be a case study of the Chicago Mercantile Exchange's GLOBEX (global exchange) automated, round-the-clock trading system. In our view, when GLOBEX finally becomes operational, it will come to be viewed as a signal event in the history of the futures industry and, for that matter, in that larger universe that encompasses the whole of the financial industry.

In the interest of putting first things first, some preliminary words about market globalization are in order. Surely I do not need to marshal a vast amount of persuasive power to convince anyone that, at this point in time, the world's economies are more interdependent than they have ever been before. Indeed, if this were not the case, we wouldn't be discussing topics such as "The Role of Exchange Rates" or "The International Debt Crisis." Because of this interna tional interdependence, and because of the great amount of cross-border bor rowing and lending, the financial industry now demands a means for trading a variety of instruments on a 24-hour basis. How else to manage the risk inherent in fluctuating exchange rates or in volatile interest rates?

But you might justifiably ask, "What about the technology? Is it in place?" Right now, the best answer is yes and no. The truth is that because of modernday miracles such as fiber optics, telecommunications satellites, and microchips, round-the-clock trading is already possible. Yet compared to what will ultimately be the standard, today's off-hour trading methods are fairly rudimentary--not necessarily standardized, not always efficient, not unfailingly liquid. This, in a nutshell, is why GLOBEX, or some version thereof, is inevitable.

What makes GLOBEX so fascinating is that it almost perfectly meets these exacting specifications. In the process, it rather tidily connects the two loose ends of what you might think of as the globalization circle. By this I mean that GLOBEX at once responds to globalization of the markets even as it facilitates,

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