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Chicago exchanges stand tall once more

The next battle in the war for survival in US exchange-traded futures is about to begin, and it looks set to be much more cut-throat than before. The Board of Trade and the Merc, once seemingly set for extinction, have been reborn as fierce competitors. They must continue to evolve.

Chicago: one of the city's major industries, the financial derivatives exchanges, have been reborn on the back of extreme market volatility

EUREX MADE ITS move quickly. So quickly, in fact, that many in the markets hadn't even heard what the Chicago Board of Trade had done earlier in the day to prompt Eurex into action until they read its announcement in the early evening of January 9. In it the Frankfurt-based derivatives exchange declared its intention of setting up its own full-fledged US derivative exchange. The reason was simple: CBOT, its partner, had decided to terminate a joint venture on electronic trading and would instead be operating Euronext's Liffe Connect system as of January 2004.

Four years ago that announcement would have sent shockwaves through Chicago. Back then Eurex was the big threat. At the start of 1998, the all-electronic exchange had completed its successful assault on the Bund futures contract traded in London in Liffe's open-outcry pits, and brought the liquidity over to its own platform. Liffe would soon announce that it was to close its pits in favour of purely electronic trading.

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