Originally Posted by the urban politician
10023, where do you see Chicago's role in global finance headed?
Originally Posted by Nowhereman1280
^^^ Well I think we can say one thing, CME group isn't going to be leaving Chicago any time soon, its becoming quite the beast...
Now we just need to steal/create a major stock exchange...
No. There's no need for another stock exchange to be created, especially not in the U.S., which has trailed London and Asia in new listings for years as a result of disparities in economic growth and burdensome regulation. The CME is not going to buy NYSE/Euronext, and even if they someday merged, it wouldn't result in a mass relocation of New York's equity traders or investment banks that underwrite equity issues to Chicago.
Cities thrive because they reach a critical mass in a particular industry or service that becomes self-reinforcing. Hence Silicon Valley has come to dominate the software and internet business, despite the fact that (due to those very products and services) physical location is now supposed to be unimportant, or at least was in the minds of 1990s prognosticators. But this ignores the obvious benefits of geographic concentration, and to an extent competitive clustering. You see this at the most basic level in something as basic as suburban strip shopping areas. Ever notice that all the car dealers tend to be right next to each other, and where there's a McDonald's there is usually a Burger King, a Wendy's, a Taco Bell, etc right there as well? Rather than wanting to locate away from each other in order to protect turf and not lose customers to the other guys, they benefit from proximity, because customers know where to look, and because each believes that they will take market share from the others, rather than vice versa.
Chicago will always be a secondary financial center to New York, but it has developed a niche in derivatives that gives it pre-eminence on a global scale. The markets are in Chicago, so everyone tied to that industry must be as well. And while the few hundred or few thousand people trading on the floor are pretty insignificant, just as the people on the floor of the NYSE are insignificant, the real "critical mass" is the dozens or hundreds of trading floors scattered across the city, the hedge funds that trade the products, the financial firms that make the markets, the lawyers and accountants that specialize in the particular arcane points of law and accounting that come into play, etc.
I don't think we'll see a day, at least not this century (never say never) when Chicago surpasses New York as a financial center. I don't even think New York will be the world's largest financial center at the end of this century. But it seems to now have a defensible position as a necessary cog in the global financial machinery, just as Boston has a solid position in asset management. It's very important for these cities to protect that, as it becomes the cornerstone of any effort to revitalize the city and ensure economic prosperity, by basically creating a floor level of white collar, high salary employment in the trading, investment, legal and accounting sectors. And being #1 at something is very important, because it makes a city the place that the industry naturally consolidates into, rather than away from.
All that said, I work in the very New York business of mergers & acquisitions advisory now, so this is not an insiders' perspective per se... just one that comes from reading every utterance of the financial press as a matter of daily routine.