Transcripts

Derivative Trading Goes Global

SUSIE GHARIB: Going global could be the wave of the future for the futures industry. Explosive growth in derivatives trading has many U.S. exchanges looking outside our borders for possible partners. Diane Eastabrook has more from Chicago.

DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Seventy five derivative exchanges worldwide trade everything from energy to crops to currencies. But consolidation is expected to pare their numbers over the next decade due to increased electronic trading, more competition for customers and de-mutualization. At the futures industry association expo in Chicago this week, global exchange leaders predict exchange consolidation will cross both continents and asset classes.

JAMES NEWSOME, PRESIDENT, NEW YORK MERCANTILE EXCHANGE: I don't think that it will matter whether they are domestic or international. I think the need to improve shareholder value will drive us toward more consolidation.

EASTABROOK: Industry consolidation has gained steam in the past few months. The New York Stock Exchange is pursuing a merger with Paris-based Euronext in hopes of gaining access to the lucrative futures market. And last month the Chicago Mercantile Exchange announced plans to merge with the Chicago Board of Trade. But that deal is being scrutinized by the U.S. Department of Justice. Analysts think anti-trust concerns will pave the way for more cross-border marriages.

RICHARD REPETTO, EXCHANGE ANALYST, SANDLER O'NEILL & PARTNERS: There are significant other benefits by expanding your markets, access to new products, so you'll see definitely more global consolidation as well as what you see in domestic consolidation here with the CBOT and the CME.

EASTABROOK: These exchange leaders think there will be even more opportunities to merge with international exchanges down the road. They say China and India are untapped markets for futures trading and they expect derivative exchanges to open there over the next several years.

ANDREAS PREUSS, CEO, EUREX: I think that both markets represent absolutely unbelievable potential for development.

WILLIAM BRODSKY, CHAIRMAN & CEO, CHICAGO BOARD OPTIONS EXCHANGE: I think that they'll have a tremendous impact on that because of the consumption as well as the production of these markets. If you look at what is going on in China with the commodity markets, it's quite outstanding.

EASTABROOK: Analysts predict that growth in derivatives trading will outpace that of equities for at least the next decade, driven by product innovation, access to new markets and increased investment by hedge funds. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Chicago.