CHICAGO -- Leaders of the Chicago Board of Trade made futures industry history yesterday by approving a new contract that will be bought and sold only on an electronic screen rather than in the frenzied environment of a trading pit.
In a unanimous vote, the CBOT board approved a proposal to trade the new product -- a scrap-steel futures contract -- through a computerized order-matching system that is in its final stages of development.
The vote on the scrap contract is the first time the exchange has endorsed a method of setting prices and buying and selling commodities not grounded in "open outcry," a system it virtually invented more than 150 years ago.
The scrap-steel contract, each one of which will allow a market user the right to take or make delivery of 100 tons of ferrous scrap steel, is the 30th new contract developed by the CBOT in the last five years. Only a third of those contracts have attracted significant volume.
Before the scrap futures can trade, the contract and screen trading system must be approved by the Commodity Futures Trading Commission, the industry regulator.
"Later on, if the [steel] contract reaches a certain volume, it will be transferred to the trading floor," said Burt Gutterman, an exchange director who heads the committee developing the screen trading system.
The screen system is a stark break with past assertions by traders that open outcry, with the sweat and adrenalin that attend it, is the most efficient trading vehicle.