Chicago Mercantile Exchange Enhances Handheld Trading

Thanks to a software upgrade announced Tuesday, traders using the Chicago Mercantile Exchange’s Galax-C handheld trading devices now can trade options on futures for any options contracts currently listed on CME Globex, the exchange’s electronic trading platform.

Handheld trading was launched at the CME (Chicago Mercantile Exchange) in 1999, and by January 2004, about 31,000 contracts per day were being traded wirelessly. That number increased to 120,000 contracts per day in February 2005, nearly 5 percent of the CME Globex volume. CME offers futures and options on futures primarily in four product areas: interest rates, stock indexes, foreign exchange and commodities.

“Our ability to introduce this upgraded options-trading functionality to our handhelds is an important step to increasing the electronic liquidity of options trading at CME,” said James Krause, the exchange’s CIO and managing director.

“On the futures side, we have established a successful track record of using our handhelds to merge trading between the electronic environment and our trading floors. For example, in the CME Eurodollar futures market, there are more than 200 handhelds in use helping to grow our electronic volume from 300,000 in January 2004 to more than 1.8 million in February 2005.”

Pit trading, which does not take place on the automated system, accounts for an average of about 700,000 contracts per day. Trading of options is growing rapidly, and the CME is encouraging growth of the electronic portion.

“I don’t think that we’re going to see a decrease in pit volume in options, but we plan to increase the electronic volume as a driver of overall growth,” said Allan Schoenberg, associate director of corporate communications at the CME.

About 400 traders are using the CME Galax-C devices, which are customized iPaqs supplied by Hewlett-Packard Co., on the trading floor. Current futures traders will not be required to change the way they trade using the devices, but they will have the option to use some of the new functionality if desired.

Click here to read about trading futures at the New York Stock Exchange.

Key changes with the new software include the ability to trade all options contracts available on the CME, as well as the ability to have two different views of the options contracts.

Users can opt to view the strike price ranges in two separate columns (calls on the left and puts on the right), or opt to view one strike price field in the center with the calls on the left and the puts on the right of the strike price.

The limit of 30 contracts has been eliminated. Users may request as many as 1,000 futures contracts if desired. The new software also includes the ability to toggle between futures and options trading screens. To learn how all of this works, traders may practice options trading on the devices in a simulated environment using the handhelds in the CME Globex Learning Center.

Handheld traders cannot yet access their e-mail or exchange instant messages from their Galax-C devices, but Schoenberg says, “We’ve looked at the options, but there’s really no decision on what we plan in place.” He says that there are a number of terminals connected to the Internet around the trading floors for those who want to check their email during the day.

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