Sun, May 12, 2002 - Page 10 News List

Trade seat in Chicago gets cheap

SUPPLY AND DEMAND Membership of the Board of Trade sold for US$241,000 on Wednesday, down 46 percent in the past three months, as options trading fell


George Doherty, center, and Mark Plantery, left, shout orders in a trading pit at the Chicago Mercantile Exchange. The cost of seats on exchanges in the Windy City have fallen in recent months as trading activity plunges.


Chicago Board of Trade membership prices fell to a 16-year low as a plunge in activity on a sister exchange cut demand for seats that confer trading privileges in both markets.

A full membership at the 154-year-old Board of Trade, which permits trading in all of the exchange's financial and grain contracts, sold for US$241,000 on Wednesday, down 46 percent in the past three months, exchange figures showed. It was the lowest price paid for a seat since May 1986, a spokeswoman said.

The slump in prices for board seats, which allow members to also trade at the Chicago Board Options Exchange, reflects a 26 percent decline in activity at the options exchange in April from a year earlier, analysts said.

Board seats are losing value because of weaker demand for stock options used to protect portfolios.

"The problems at the CBOE are having a major impact" on Chicago Board of Trade membership values, said Raymond Cahnman, a CBOT director who trades bond futures. "Our fortunes are tied together."

About 45 percent of CBOT seats are used to trade at the options exchange.

The Chicago Board of Trade, the second-largest US futures market, has been introducing new contracts, such as futures tied to interest-rate swaps, and investing in its electronic order-routing system to stem the flow of traders to the Chicago Mercantile Exchange and other derivatives markets.

Last month, the board lowered trading fees as much as 40 percent in its auction-style pits in a bid to boost activity and prop up membership prices, which have lost 72 percent of their value since reaching a record high of US$857,500 in September 1997.

The Board of Trade is home to futures and options linked to government debt, the Dow Jones Industrial Average index and farm commodities such as soybean and oats.

Seat prices are also down at the options exchange, falling 3.3 percent to US$192,500 yesterday from US$199,000 on May 3. CBOE memberships have lost 74 percent of their value since reaching a high of US$735,100 on Feb. 27, 1998, exchange figures showed.

Chicago Board of Trade members have had the right to buy and sell contracts at the options exchange since the CBOE was founded in 1973 by a group of Board of Trade members. The markets are connected by a glass-enclosed walkway across Van Buren Street in Chicago's Loop district.

"I have talked to the CBOE leadership and I know that the stock-market slowdown has seriously impacted their membership value," Board of Trade Chairman Nickolas Neubauer said in an April 24 address to board members.

About 630 of the board's 1,402 memberships are used to trade at the options exchange, Neubauer said. In December 2000, 700 CBOT memberships were used to access the options exchange.

Traders bought and sold 21.69 million contract on the options exchange in April, down from 29.45 million in April 2001, exchange figures showed. Average daily volume for the month fell 33 percent from a year earlier to 986,024 contracts from 1.47 million.

At the Board of Trade, trading volume rose 18 percent in April from a year earlier to 23.735 million contracts, the board said. For the first four months of the year, trading rose 15 percent from a year ago to 94.97 million contracts.

The Board of Trade, founded in 1848 to buy and sell wheat, corn and other agricultural commodities, was surpassed in 2001 as the busiest US futures market by the Chicago Mercantile Exchange, home to contracts linked to Eurodollars, the Standard & Poor's 500 index, livestock and milk.

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