Exchange Studies Computer Chip Trading

If the Chicago Board of Trade gets its way, computer chips will join pork bellies and soybeans as commodities on which futures contracts are traded.

The Chicago futures exchange has the idea “under study and is trying to design a contract” to submit to the Commodity Futures Trading Commission, spokesman Mark Prout said Wednesday. The exchange is pursuing an idea that was proposed two years ago by the Pacific Stock Exchange in San Francisco and the Twin Cities Board of Trade in Minneapolis but was later abandoned.

The Pacific Stock Exchange, which is registered with the CFTC as a futures exchange but has not installed the equipment necessary for such trading, had to forgo its plan because of the high cost involved in getting set up.

The chips at issue would be dynamic random access memories, or DRAMs, which are the dominant memory storage devices used in computers and other electronics products.

Proponents of the idea contend that DRAMs lend themselves nicely to the purpose of futures markets, which is to hedge against price volatility, a phenomenon that has frequently battered the electronics industry. Futures contracts allow manufacturers and users of commodities to establish buy or sell prices in advance.

Prout said the Chicago exchange has found it difficult to specify a particular DRAM product for futures trading because of the technology’s fast-changing nature. Industry watchers pointed out that the technology will soon be in a transition phase, with more powerful 4-megabit DRAMs becoming as economical as 1-megabit chips, the current industry standard.