"Thanks a billion!" Eurodollar flagship flies from the pits

The Financial Times ^ | November 24 2004 | By Jeremy Grant

[M. Espinola]

"Thanks a billion!" reads a banner hanging at the entrance to the Chicago Mercantile Exchange.

The message was posted last month when the number of trades handled by the CME's Globex electronic trading system, which was launched 12 years ago, surpassed 1bn.

A less advertised - but more telling - statistic is the speed with which the CME's flagship Eurodollar contracts have shifted from "open outcry" trading to Globex.

In January, when the CME launched an effort to "migrate" Eurodollar trading from its trading pits to the computer, only 9.6 per cent of Eurodollar contracts were traded on Globex. This week, that had risen to 75 per cent.

Mary McDonnell, chief executive of Geneva Trading, a proprietary trading firm, witnessed the early days of transition to electronic trading in 2000 at the Chicago Board of Trade.

She says: "I think it's amazing. At the CBOT you'd see 5 per cent [moving electronic] per month."

Four factors help explain the phenomenon. First, there appears to have been pent-up demand from large institutional customers for Eurodollar contracts to be made available on Globex, allowing faster execution and clearing, as well as bigger trades.

Second, with a rival electronic-only Eurodollar offering launched in March by Euronext-Liffe, the CME was under pressure to go electronic.

Third, while trading Eurodollars electronically still costs 73 cents per contract compared with 57 cents in the pits, the CME this year introduced incentives in Europe and Asia to attract new customers to Globex.

Finally, March saw the introduction of hand-held electronic trading devices that allowed any pit trader to use them free of charge. Of the 400 devices currently in use, more than half are used by Eurodollar traders.

[M. Espinola]

Forgot to type in the link:

http://news.ft.com/cms/s/c66dc3de-3e51-11d9-a9d7-00000e2511c8.html

[ChicagoRighty]

Was one of the original users on the Reuters Globex terminal in 1992... still connected today. Sky's the limit.

[hedgie]

You have pictures of Euro currency but the contract they are talking about here is the "eurodollar" not "Euro/Dollar."

Eurodollar futures are contracts on a 3 month time deposit of US dollars in an offshore bank commencing at some future date.

[tjwmason]

This raises an interesting point. Adding the prefix 'euro' to a term denotes that it is an off-shore device (deriving from Euro-dollars being Dollar contracts traded in Europe, back in the bad old days of exchange controls), when the Euro was launched as a currency this presented a problem what does one call a Euro device outside the E.U.? A euroeuro? Also bonds have been widely traded as eurobonds, what does one call a bond denominated in Euros?

Damn E.U. We should pull out as soon as we can.

[Procyon]

It's time to retire the term "eurodollars" and replace it with "offshore dollars." Thus "euro-euros" can be called "offshore euros."

[M. Espinola]

You are correct. I thought posting ours $ would be boring thus the 'other Euro' which are a paying a lot more for, now over 131.