Backlash from 'terror exchange' no surprise
Daniel P Collins. Futures. Chicago: Sep 2003.Vol.32, Iss. 11;  pg. 17

Abstract (Document Summary)

Chicago Mercantile Exchange Chairman Emeritus Leo Melamed, who wasn't 
consulted on the project, denounces the Pentagon's ill-fated Policy Analysis 
Market, which was publicly assailed the morning of July 29 and officially 
scrapped by noon that day. Perhaps the folks over at the Pentagon should 
have sought some insight from the industry before drawing up their plans. 


BAD IDEA

When the futures markets bleed over to the front-page, it's not always good 
P.R. for the industry. Cases in point: futures allegedly caused the '87 
Crash, buried Orange County, were behind the collapse of Long-Term Capital 
Management, helped derivatives trader Enron implode. The Pentagon's 
ill-fated Policy Analysis Market, which the mainstream media dubbed a 
"futures market on terrorist attacks," was no exception to this rule.

CME Chairman Emeritus Leo Melamed, who wasn't consulted on the project, 
denounces the effort, which was publicly assailed the morning of July 29 and 
officially scrapped by noon that day.

"The whole thing was absurd, the most ridiculous thing I heard in a long 
time," Melamed says.

Melamed, who heard about the Policy Analysis Market after returning from 
Tokyo, says that other specialty electronic markets, such as those involving 
sports and politics, are basically polling devices with prizes, not futures 
markets.

"It is a fundamental economic issue. Markets in futures have an economic 
underpinning. You have to have an economic purpose and an economic 
justification and an economic use of the market as a tool to hedge. This had 
none of that," Melamed says.

Perhaps the folks over at the Pentagon should have sought some insight from 
the industry before drawing up their plans. They might have avoided some bad 
press of their own.
[Sidebar]
QUIP AND QUOTE:
"I like to think that futures traders are smarter than securities traders."
- Peter Borish, senior managing director at OneChicago, when asked why more 
single stock futures are traded through futures accounts than equities 
accounts.