LIQUIDITY ANALYSIS. THE DEMOCRATIZATION OF CAPITAL
. Chicago Mercantile Exchange

The Milken Institute's 2006 Capital Access Index is out. It measures the degree of "democratization of capital", i.e. the ease with which entrepreneurs get access to financing. Looking at the top and bottom positions, one obvious conclusion comes to mind: entrepreneurs get better access to finance in countries where property rights are stable and the rule of law prevails. Countries with high savings rates but weak property rights, like China, are an important piece of the global liquidity puzzle. As these countries take steps to solidify property rights, we are likely to see more moderate inflows into our own markets.

This is one of the reasons why we are witnessing, right now, an impressive move ―led by the Chicago futures exchanges― to "democratize" access to capital ... within the United States. Coming right after the Housing Futures and Options, the Chicago Mercantile Exchange plans to launch Credit Index Event contracts in the second quarter of 2007. Meanwhile, encouraged by the success of the VIX, the Chicago Board of Options Exchange has just announced a new benchmark index for selling volatility.

More endogenous liquidity is coming our way.