August 20, 1999
BLOOMBERG NEWS
William O'Brien lost a legal tussel with Oprah Winfrey, but he's hoping for a comeback against the Chicago Mercantile Exchange.
O'Brien is the 56-year-old feedlot operator and commodities trade from Amarillo, Texas, who lost his suit against Oprah for saying on her television program that she would stop eating beef.
His new campaign is to be the first to offer live cattle futures over the Internet, where he'll be going up against the Chicago Merc, the second-largest U.S. futures market, where about $350 million of cattle futures trade each day.
A test of O'Brien's exchange, called FutureCom, this week and next will be the latest hurdle for starting the first Internet-based futures exchange for U.S. customers. FutureCom would join a string of electronic challengers to the Merc and other traditional exchanges where orders are shouted and signaled on a trading floor--the open-outcry method.
``You don't have to have dedicated phone lines and equipment that costs thousands of dollars just to get hooked up,'' O'Brien said. ``It makes trading quicker, more transparent and cheaper.''
Auditforce Inc., a Milwaukee-based company that audits Internet security, is testing FutureCom at the request of the federal Commodity Futures Trading Commission to see whether trading will be sound and secure.
Some farmers have been waiting eagerly to use the new system. ``I'd be very interested to see how it was going to work,'' said Dana Hauck, who raises 1,200 head of cattle in Delphos, Kansas.
Since O'Brien first sought government approval in January 1997, reams of documents have traveled between Amarillo and Washington as regulators raised questions about the exchange's technology and structure.
Commission officials, who in late June went to Amarillo to review the exchange, aren't convinced the system is sound.
``We're anxious to approve an Internet-based contract market,'' said I. Michael Greenberger, the agency's director of trading and markets. ``But we must have solid evidence from a reputable third party that the system has a high degree of integrity that ensures the safety of market users.''
The staff will review Auditforce's findings, then make a recommendation to the full commission. If the agency votes to approve FutureCom, the exchange would start trading about 90 days later.
Established exchanges are under fire from computer-based competitors--such as New York's Cantor Exchange and a network being developed by a group of brokers--who promise lower cost and greater trading speed.