-By Warner Todd Huston
Fox Business Network is leaping head first into full time coverage right in the thick of it all at the Chicago Mercantile Exchange with a new CME-based studio booth on the next level up from trading floor itself. Interestingly, this marks as the very first time a financial network will have its own, branded booth so close to the floor.
Thursday afternoon I spoke to Fox Business Network correspondent Jeff Flock about the grand opening of the CME booth and asked him what made the Network make this move. "Since both exchanges were consolidated there that makes that floor the center for futures trading in the country and now Fox Business will have a permanent presence where all the traders can see us."
"It took no special influence to get us in there, but we just think its an important market to cover. We just recognized from the start that this is the center for futures trading, maybe in the world when it comes down to derivatives -- and derivatives are a huge story because they allow the hedging of risk for the entire market. To have both agricultural as well as financial commodities on the same floor, you almost have to be there."
"It's already almost like a news room down there," Flock told me. "Traders live and die off information and when you're on the floor you sometimes hear a rumor of something long before the news breaks. The floor is a locus of information which really argues for us being there full time." Flock said that a whole array of on-the-spot information will now be available for the Network to report upon now that the studio was moved from its previous location on Wacker Drive in nearby Downtown Chicago.
"Being on the floor you end up hearing things a lot sooner. Not only derivatives but those credit default swaps which some people blame for the financial crisis because they were not cleared on any exchange, now the CME is in a position to clear those through their mechanisms and will bring them into the light of day. That is a huge story, too. So, there are a number of things that will develop, I think."
Flock was also excited about the fact that the CME is an "old fashioned" trading floor and not as antiseptic as the fully computerized New York exchange.
"You have traders screaming at each other making sales the old fashioned way, it's real people trading with real people as opposed to on computers somewhere. Chicago still has that open outcry system and this gives us a better chance to see what's really going on as opposed to everything just being on computers."
CME Executive Chairman Terry Duffy will join FBN's Connell McShane to help celebrate the launch at 10AM central on Wednesday, June 1. Going forward, Jeff Flock will be assigned full-time to cover the CME from Chicago.
Here are some highlights of the on-air interview this morning:
CME CHIEF TERRY DUFFY TELLS FOX BUSINESS A MERGER BETWEEN THE NEW YORK STOCK EXCHANGE AND DEUTSCHE BORSE WOULDN'T CHANGE THE COMPETITIVE LANDSCAPE "AT ALL"
Chicago Mercantile Exchange (CME) Group Executive Chairman Terry Duffy spoke with FOX Business Network's (FBN) Connell McShane about the success and profitability of the exchange and the changing regulatory and competitive landscape in which they operate. Duffy said he does not believe a merger between the New York Stock Exchange (NYSE) and Deutsche Börse (DB) would "change us in a competitive way." He went on to say amid potential increased regulation as a result of Dodd-Frank, his primary concern is preventing regulators from "trying to impose additional rules on companies like CME that had nothing to do with the meltdown of 2008."
Excerpts from the interview are below.
On how the potential NYSE/DB merger will change their business:
"I don't think it changes it at all. We are competing with both Deutsche Börse and NYSE's life division today so to think it's going to change us in a competitive way I don't see it. They are going to create some synergies if the transaction goes through and give those values back to their shareholders but as far as competition goes, I don't see it as changing the landscape."
On the push for oversight and regulations of derivative trading:
"The futures business didn't cause the collapse of 2008-2009. It was overleveraged banks, housing markets, things of that nature. Hopefully the Dodd-Frank act when its implemented will alleviate some of those problems. What I am concerned about is the regulators trying to impose additional rules on companies like CME that had nothing to do with the meltdown of 2008."
On CME Group CEO Craig Donahue's pay package coming under question by shareholder advocacy group ISS:
"The stock hasn't performed, no one is happy about that. We are continually doing very well as a company but for whatever reason the stock hasn't performed so they have to withhold vote on his compensation. I don't think it's appropriate but at the same time we will deal with the shareholders at the meeting and explain our viewpoint on why it's appropriate to keep someone like Craig at the compensation we have today."
On whether he has considered rolling back margin requirements raised in the past due to commodity market swings:
"On the margins it is not about price it's about risk management to make sure we have the proper funds. That's really the only reason margins go up and down. We will have to wait and see how the volatile markets go. Margins are not a tool that affect the price of the product."