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On September 10, 1993, OFOR hosted
a symposium at the Chicago Board of Trade, "Research Frontiers in
Futures and Options: An Exchange of Ideas; A Symposium in Recognition
of Thomas A. Hieronymus."
Seven eminent scholars of futures markets presented papers. They were
Thomas A. Hieronymus, Robert J. Hauser, and Virginia G. France, all
of the University of Illinois, Urbana-Champaign; William P. Albrecht,
University of Iowa and former CFTC commissioner; William G. Tomek,
Cornell University; Todd E. Petzel, senior vice president, Chicago
Mercantile Exchange; and Mark J. Powers, chief executive officer of
Powers Research Associates, and editor of The Journal of Futures Markets.
Each paper presentation was followed by a discussion.
The papers first discussed the historical development of futures markets
with recognition of the major role that Professor Hieronymus played
in advancing these markets. Hieronymus was a pioneer in the study
of commodity futures markets and the author of many early publications
describing their practical use. The author of a seminal textbook on
futures markets, he was a leading critic of regulatory processes.
Professor Hieronymus's career also spans a period of exceptional growth
in trading volume and many innovative research developments in futures
markets.
Each of the seven papers used this rich history as background to assess
the current status of the futures industry and then suggested future
research agendas. Many of the research questions have not changed
that much over time. There is still need for practical, relevant research
on the important questions facing the industry. What has changed over
time are the dynamics of the markets; types and styles of traders;
new contracts and settlement procedures; options on futures; technology
and telecommunications; regulatory procedures; and international linkages
and competition-to name a few noteworthy developments. This period
also has seen a merging of research topics and methodology in the
agricultural economics and finance professions.
The questions remaining seem timeless. However, concern is raised
that a considerable amount of the current research in futures and
options markets strays away from the important topics facing the industry
and is performed more to satisfy methodological concerns than to advance
basic, ground-breaking research.
The suggested research topics fall into three areas:
Market Performance, Forward Pricing Efficiency, and Basis Behavior: How
has basis behavior changed over time? What are appropriate contract
specifications and delivery terms? How do different margins affect
trader
behavior? What is the effect of trading funds and computers on prices
and the flow of funds?
Risk Management: What are the appropriate hedging strategies-given
changing market structures and firm integration? Are the new derivative
instruments reasonable substitutes? What is the definition of hedging,
and how should hedges be taxed? What contribution can a new futures
market make to a developing country?
Regulation: What are the proper boundaries for exchange, clearinghouse,
and federal government regulatory authority? Should new off-exchange,
over-the-counter derivatives be regulated, and if so, by whom? What
is manipulation? What are the costs and benefits of regulation? Can
futures substitute for grain-market price supports, and if so, how?
Researchers need to be innovative, relevant, and practical. There
is no substitute for clear, careful thinking in applying economic
theory and statistical methodology to understand problems facing the
futures industry. Professor Hieronymus's research was characterized
as being decisive and timely-still among today's relevant research
goals.
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