Exchanges Face New IT Demands, Merc CIO Says

By Lucas Mearian

July 18, 2005 12:00 PM ET

Computerworld - Over the past five years, Chicago Mercantile Exchange Inc. (CME) has gone from trading 15% of its futures contracts electronically to processing almost 75% of them online -- while also increasing the number of contracts it processes daily from 917,000 to 4.2 million. CIO Jim Krause spoke with Computerworld last week about some of the ongoing IT challenges that the CME faces.

The New York Stock Exchange is buying an electronic trading platform with its acquisition of Archipelago Holdings, and Nasdaq is replacing its SuperMontage trading technology through its acquisition of Instinet. How is the CME going to keep up with the other exchanges? I think the big issue you'll see with automated trading -- I know Nasdaq has this issue because we've talked to them -- is the proliferation of market data, especially when you start trading options electronically.
One of the big things we've been working on with the other exchanges is developing highly efficient standards and capabilities, such that you can minimize bandwidth growth impacts and maximize the amount of information going out the door to traders.

With its acquisition of Archipelago, the NYSE is going public. You went public more than two years ago. How did that affect your use of technology? Going public and having to react to shareholders' concerns has put more demands on IT to deliver functionality and capabilities. I think we met those challenges, though maybe the [trading-volume] growth rates could have been better if we were faster. It's hard to say.
I think we realize the electronic market is the key to the exchange in the future, and we're willing to invest in the technologies [that are needed] to expand the trading [and] keep it a premier platform going forward. In the end, it is still all about shareholder value.


Jim Krause, CIO of Chicago Mercantile Exchange Inc. (CME)

The NYSE is looking at keeping a hybrid system going forward that includes both electronic and traditional floor trading. Do you think that can work? We're still in a hybrid mode. If you look at what makes a market, is it technology or something else? I'd argue it's something else, and that something else is liquidity -- the ability to get in and get out of a market when you want to. Electronics can certainly help that.
What we've done is figured out that instead of bifurcating liquidity between open outcry and electronic [trading], we could marry those two into a single market. Obviously, the customers have been deciding to move electronically, but

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