Musings - Wednesday, February 6, 2008 17:48 - Comments

Futures exchanges rubbing elbows

While The Economist reports on the being-negotiated CME-NYMEX deal, it also reports on the competitive landscape among futures exchanges.

Namely, a field with significant barriers to entry, successfully preserved, ensuring inertia in the order flows, and recognized by investors:

Some customers fear that the CME will start to raise trading fees once it has swallowed its rivals. This worry is particularly acute in a business in which barriers to entry are much higher than in cash equities, where nimble electronic trading networks have helped to hammer down commissions. Most attempts to poach futures business have been quickly repelled, except when an online exchange has targeted an inefficient “open outcry” market, as InterContinental Exchange did when nabbing oil futures from NYMEX before the latter went electronic. With the CME already a leader in screen trading, it looks all but unassailable.[...]

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