The future(s) is Chicago

Sue me, for getting excited over the Merc and CBOT merger. Downtown Chicago is just THE place to bet on anything. From pork bellies to gold to currencies, you name it.

I first learned the details of what the Merc and CBOT do in the first two chapters of a book entitled The Predictors by Thomas A. Bass, first published in 1999.

The Chicago Mercantile Exchange, founded a hundred years ago as the Butter and Egg Board, used to be famous for trading pork bellies and cattle. Then, in the early 1970s, it expanded the idea of a commodity to include Deutsche marks, dollars, and other foreign currencies. Next came trading in stock market indexes, Treasury bills, Eurodollars, cross-rates, straddles, rolling spot and a host of other bets designed to slice the time value of money into ever thinner tranches.

The CBOT (“See-Bot”), Chicago’s oldest and second-biggest financial exchange, occupies the forty-five-story art deco building that anchors the southern end of LaSalle, Chicago’s equivalent of Wall Street. The Chicago Board of Trade was founded in 1848 by grain merchants, which explains why a thirty-foot statue of Ceres, the Roman goddess of grain, graces the roof. But long ago the big game at the CBOT passed from grain to money, in this case, futures and options on U.S. Treasury Bonds.

On traders on the floor of both exchanges:

Big men in steel-toed shoes, who will lose their voices and retreat to the back office before they are forty, are jammed together so closely that they can tell what their neighbors ate for breakfast. They pull their jackets over their heads when someone farts. They goose one another after a good trade. They hurl catcalls at women being trained as runners. This is a hard-drinking, high-cholesterol crowd, barely graduated from toga parties, who today are flushing Eurodollars down the drain and betting hard against United States Treasury. The joke in Chicago is that these people, if they weren’t running the world financial markets, would be driving taxis.

BusinessWeek had compiled some comments from industry people about the merger, when at least 3 previous attempts in the last 30 years have failed.

The market seems to have given blessings to the exercise, which is expected to be completed by mid of 2007.

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