Project A

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Project A was a computerized trading system introduced by the Chicago Board of Trade in the early 1990s. It replaced the Globex trading system owned by the CBOT, the Chicago Mercantile Exchange and Reuters PLC.[1] The electronic trading system launched on October 10, 1992.

The technology was grounded on Sun Microsystems Inc. and Tandy Inc. hardware and software. The platform was based on Sun Microsystems's SPARCstation. At its launch the CBOT installed 100 workstations in the offices of member firms and on the trading floor.[2]

Burt Gutterman, a member of the CBOT, was the vice-chairman of the exchange in charge of the Project A system.

Project A used a pro-rata trade distribution, which encouraged traders to post larger bids and offers in an attempt to garner more contracts of a particular trade.[3]

History

The first electronic trading system developed at the CBOT was called Aurora, approved by exchange members in 1989.[4][5] Project A was later replaced by a platform from Eurex when the CBOT joined with the German Exchange to form the a/c/e Alliance. In 2003, the CBOT moved to the Liffe Connect trading platform developed by the pan-European exchange Euronext.liffe.[6][7]

The CBOT's move away from the a/c/e platform with Eurex prompted the German exchange to open a U.S. futures exchange, Eurex US, to compete with the CBOT for trading of U.S. interest rate futures.[8][9] The original a/c/e alliance deal prevented Eurex and the CBOT from introducing competing products in each other's markets.[10]

Originally the CBOT members rejected the Eurex deal in January of 1999, but later approved in in June of that year.[11]

Project A was originally offered during non-open-outcry trading hours, after the evening open-outcry session for trading treasury futures.

In 1999, the first Project A terminal were introduce in Paris for continental Europe. Volume from London at the time represented 18% of total Project A volume. At the time, there were 573 Project A terminals around the world, including 18 in London and 554 in the U.S., including 42 in New York and 506 in Chicago.[12]

Pressure to move away from the closed network Project A system was prompted partly by potential competition from the Cantor Exchange, a competitor from Cantor Fitzgerald.[13] In early 2000 the CBOT developed a plan to spin off their electronic markets into a separate exchange named EBOT and move to the Eurex trading platform. That plan to split the exchange was later dumped after a political upheaval at the exchange, which eventually pursued a demutualization strategy.

Globex

When the CME initially promoted Globex, the CBOT was dismissive of the electronic trading platform. Globex was criticized for being an order matching system, not an auction system like the trading pits. The CBOT subsequently developed the Aurora trading platform, which displayed the identities of buyers and sellers, not just quantities and price.[14]

Despite a history of acrimony, the CBOT eventually joined the Globex system.[15]

The CBOT walked away from the Globex agreement in 1993 and adopted Project A. They never listed their leading grain futures contracts on the Reuters-based Globex system, partly because the system could not handle and display eighths, which the CBOT grain products are displayed in, though they traded in quarters.[16]

References

  1. Cbot Oks Computer-trading Trial. Chicago Tribune.
  2. CBOT preps to launch Project A. Wall Street & Technology.
  3. CBOT's 'Project A' Is Sparking an Outcry. Wall Street Journal.
  4. Random bits of history and artifacts from open outcry futures pit trading. Trading Pit Blog.
  5. Chicago Board of Trade members approved Aurora, an. Chicago Tribune.
  6. CBOT to use Liffe Connect. Risk.net.
  7. Chicago Board of Trade to Use LIFFE CONNECT as Software for CBOT Electronic Trading Platform. Biofuels Journal.
  8. CBOT, Eurex Go Their Separate Ways. Think Advisor.
  9. Eurex to launch US derivatives exchange as Cbot turns to Liffe Connect. Finextra.
  10. Chicago Board of Trade Pit Brokers Confront Electronic Future. Bloomberg.
  11. CBOT links with Eurex. CNN Money.
  12. Project A to launch in Paris on March 5. Mondovisione.
  13. EBOT, The Missing Link?. Wall Street & Technology.
  14. Cbot Electronic System Reveals More. Chicago Tribune.
  15. CBOT, Merc OK talks to merge Globex, Aurora systems. Chicago Suntimes.
  16. Ultimatum To Cbot Is Revealed In Globex Flap. Chicago Tribune.