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Exchanges - who needs them?

What will futures exchanges be like in the next millennium? As electronic markets bring end-users ever closer, will we need them at all? Exchanges could eventually be replaced by giant clearing houses. But traditionalists say there will always be a demand for the intensity of the trading pit, and none argue with more passion than Pat Catania. David Shirreff reports.

Futures industry professionals at their annual bash in London last month were asked to debate the motion "futures exchanges have enjoyed their last good years". This wasn't about open outcry, since they'd condemned that roundly the year before, voting with hand-held electronic devices. Now the issue was whether exchanges, even automated ones, will thrive in any form.

In the pre-debate vote, 58% of those present said they won't. But by the end, as in all good debates, some of them had changed their mind: 52% now saw a rosy future for exchanges.

What had altered their view? Was it the powerful argument that futures and derivatives volumes have always increased year-on-year since the early 1980s? Was it the conclusion that almost any trading place, even the internet, qualifies as an exchange? Or was it another factor which could be called "the passion of Pat Catania"?

Dawn of the cybertrader

Catania, solid, forty-something, is executive vice president for business development at the Chicago Board of Trade (CBOT). Even his name - Irish with Italian connections - seems the essence of what put Chicago on the map. Catania, in an impassioned speech, praised the Chicago pits' ability to evolve along with new markets and new technology.

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