A not-so-black Monday for CBOT
Investing is supposed to be rational, but it’s just as often driven by hunches and superstition.
Investing is supposed to be rational, but it’s just as often driven by hunches and superstition. So it came as a surprise to many traders that CBOT Holdings, parent company of the 157-year-old Chicago Board of Trade, held its first day of NYSE trading on October 19 -- the 18th anniversary of the Black Monday stock market crash.
Then again, it’s possible that the date was not a coincidence. Black Monday, as it turns out, wasn’t such a dark day for the CBOT: The biggest one-day stock market drop in history sent investors rushing into the relative safety of the U.S. Treasury market. Some 500,000 bond futures contracts traded in the frenzied CBOT pits that day.
The timing of the IPO was appropriate, says Matlock Capital CEO Blair Hull, who famously stepped into the exchange’s pits the day after the Black Monday crash to buy stock index futures at their lowest point. “The CBOT never got the credit they deserved,” he adds. "[Black Monday] showed their stability and ability to keep an orderly market.”
A CBOT spokeswoman, citing quiet-period regulations, wouldn’t comment on the deal’s timing. Neither would J.P. Morgan or Credit Suisse First Boston, underwriters of the $172 million IPO.
In the end, the anniversary was another momentous day in CBOT history, despite fears that the debacle surrounding futures brokerage Refco would adversely affect the offering. The company’s shares rose 56.3 percent, to $84.40 in first-day trading. By October 28 the shares were changing hands for $115 apiece, giving the CBOT a market capitalization of more than $6 billion.