The battle for the US gold futures market is becoming more intense, with the first signs the Chicago Board of Trade’s (CBOT) gold futures contracts are taking market share from the incumbent Comex.
Since CBOT launched its electronic gold futures contracts in October 2004, the US gold futures market has grown. However, the recent gold price slide has seen several investors quit the gold market. That in turn has led to a shrinking of the amount of gold futures contracts held by investors.
During the last two months, holdings in CBOT’s gold futures have risen, and there was been a corresponding fall in the holdings of Comex futures. This has led to the CBOT increasing its market share at the expense of Comex, which is owned by the New York Mercantile Exchange.
“We are seeing more commercial players come into our contract, and that is diversifying our user base, and with new players coming into the contract we are now at last starting to take some market share,” said Bernard Dan, chief executive of CBOT: “It has taken us about 18 months to get here, but we feel we can grow our market share further from here.”
John Reade, precious metals strategist at UBS, said the open interest, which is the total amount of futures contracts held, in the Comex gold futures contract had fallen from more than 342,000 contracts on April 11, to about 289,000 contracts at present. Open interest in the CBOT gold futures contract had risen from more than 16,000 to almost 26,000.
The CBOT gold futures contract now accounts for about 9.5 per cent of the total US gold futures market.
Comex is responding to the increased competitive threat. Traders said the Comex policy of setting daily price trading limits had led to many trading suspensions in recent months as volatility in the gold market had increased.
“When Comex suspended trade, the gold market would just move over and trade on CBOT,” said Mr Reade. Comex is understood to be reviewing its daily price limit policy.
Comex has so far been reluctant to embrace electronic trade, but is having to react by extending the trading period of its after-hours electronic system. However, it has yet to decide whether to introduce electronic trading alongside pit trading during normal trading hours. Its parent Nymex introduced electronic trading in its energy futures contracts during its pit opening hours last week.
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