The Chicago Trading Forum

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A Day Of Issues, Debate & Controversy
The 2nd annual Chicago Trading Forum was an interesting event that brought together a wide variety of options, futures & securities representatives. The forum touched on a host of issues including:

• Alternative Trading Systems

• Options Clearing Systems

• Portfolio Margining

• SEC vs. CFTC
  

• The Troubled History of Single Stock Futures
  

• and, of course, Penny Pricing.
  

However, like any industry gathering, the forum was not without its share of controversy.



Ode To A Leviathan
The forum began with an intriguing keynote by Craig Donohue, CEO of the Chicago Mercantile Exchange Group. Donohue's speech focused on the dangers posed by market fragmentation and the benefits of a strong & centralized market structure:

"The more fragmentation that exists in the market, the less reliable the market becomes," said Donohue. "In a fragmented market, reduced transaction costs can be absorbed and internalized by the intermediary rather than passed on to the customer. That is of great concern to me."

The belief that fragmentation causes increased friction and higher transaction costs is hardly controversial. However, when the head of the most powerful derivatives monopoly in the world condemns  "fragmentation" as the enemy of the marketplace, it takes on an entirely different context. In that circumstance, it is hard not to view the term "fragmentation" as a thinly veiled code word for competition.

Is Competition The Enemy?
While the keynote was ostensibly an overview of the problems with MFID and the European futures markets, the subtext of the speech was not lost onanyone attending the forum. In fact, Donohue had barely finished his address before being bombarded by questions regarding his views on competition.

"With the right market structure, I have no problem with competition," Donohue responded to one of the questioners. "My concern is that the market structure that causes competition will also lead to a net welfare loss for the people who use that market."

An Intriguing Start...
Whether or not you agree with Donohue's views on fragmentation and competition, his keynote certainly made for an intriguing beginning to the forum. The event would go on to include discussions of options block trading, penny pricing vs. dollar strikes, regulatory bifurcation, the anniversary of the crash of 1987 and a host of other hot issues in the derivatives markets...

Continued in "Block Trading For Options?"...
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