Cbot shies away from Eurex alliance

Members of the Chicago Board of Trade (Cbot) yesterday voted to ditch plans to form an alliance with Eurex, the Swiss-German derivatives exchange based in Frankfurt.

In a significant about turn, Cbot members voted 450 to 390 in favour of halting the proposed Cbot Eurex Alliance.

Recently appointed Cbot chairman, David Brennan, said: "I will continue to explore initiatives that meld the cost efficiencies of electronic trading with the transaction efficiencies of open outcry trading."

Cbot has an electronic system, called Project A, which now has 560 screens in use Chicago and London. However, a tie-up with the all electronic Eurex would have accelerated the migration away from pit-based, open outcry trading - still the lifeblood of the world's largest derivatives exchange - and put jobs at risk.

At the London International Financial Futures and Options Exchange (Liffe), where a state-of-the-art electronic system was eventually introduced for equity options last November, open outcry died out, even though the original plan was to run the pits alongside an electronic system.

One source close to the events at the Cbot commented: "People should realise that Brennan isn't against electronic trading - after all, he arranged the move to the new high-tech trading floors in Chicago."

He added: "This is more about members getting consulting bills in the millions for a Chicago-Eurex alliance that would lead to a lot of control going to the Germans. Brennan, and the members, were acting in the exchange's best interests."