The 32-year-old Sydney Futures Exchange has completed a five-year development program intended to set it on track to meet the business demands of the 1990s.

Initiatives in recent years include the move to a new trading floor; introduction of an after-hours, screen-dealing system, called Sycom; and launching of up-to-the-minute computer systems for price reporting, trade matching, and clearing.

Les Hosking, chief executive of the exchange, said he looks back on 1991 as a watershed year.

Creating a Clearing System

"The year 1991, when the SFE experienced the highest turnover in its history, was also marked by dramatic developments in our systems," he said. "Implementing its own clearing system was the most important move the SFE has made regarding its internal structure.

"It's not often that you see an exchange develop its own clearing system," Mr. Hosking said. "It was a monumental job to be done in 12 months, and it was done successfully. And within four days of shifting over to the new system in December, we had record turnover."

Turnover last year totaled 12.5 million contracts, an increase of 8% from the previous year. And that volume outstripped the previous record of 11.53 million contracts, set in 1989.

Launching of the Sydney Futures Exchange Clearing House began a new era for the exchange; it assumed responsibilities for clearing and guaranteeing its markets through the newly formed subsidiary.

Previously, the exchange was cleared by the International Commodities Clearing House. The British-owned ICCH had given notice to the Sydney exchange in October 1990 that it intended to end its contract in November 1991, giving the exchange a little more than a year to devise new clearing and guarantee arrangements.

The exchange chose to develop its own clearing house subsidiary and to structure a mutual financial backing arrangement with its own members, similar to those used on many U.S. futures exchanges. The Sydney exchange also developed its own systems for managing risk.

Upgrading Sycom

Other 1991 milestones were introduction of Sycom II in May and acquisition, in December, of the New Zealand Futures and Options Exchange, now a wholly owned subsidiary.

Sycom, or Sydney computerized overnight market, was introduced in November 1989 as an after-hours, automated, screen-dealing system. It enabled trading in futures contracts during hours when the trading floor is closed. Sycom II broadened the system's scope by introducing options and increasing screen and contract capacity.

"Volumes on Sycom have doubled since May," said Mr. Hosking.

Sycom's late trading has been extended from midnight to 2 a.m., to accommodate business from London. With U.S. users increasing, Sycom has moved on occasion to a 4 a.m. closing to take account of releases of U.S. economic data. Mr. Hosking predicted that Sycom would move to a regular 4 a.m. closing by yearend.

In addition to succeeding in its home market, Sycom has caught the attention of overseas exchanges. A version of the system is being sold to the New York Mercantile Exchange.

The New Zealand Option

With its acquisition of the New Zealand exchange, the Sydney institution has added trading in equity options to its activities. Other than that, contracts traded on the New Zealand exchange are broadly similar to those offered by its Sydney parent. The former operates as a subsidiary of the Sydney exchange but retains autonomy on staff, contracts, and regulatory environment.

After a landmark year in 1991, the Sydney Futures Exchange maintained its heady pace by starting the new year with record trading volume in January. Monthly turnover was 1.6 million contracts, topping an earlier record of 1.32 million last June.

Mr. Hosking attributed the surge in activity to a combination of factors, including domestic political uncertainties associated with a change in prime ministers, from Bob Hawke to Paul Keating; encouraging financial data, such as the lowest inflation rate since 1964, but uncertainty over further declines in interest rates; a drop in the Australian dollar; and speculation about the government's economic statement, released in late February.

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