He wants to take you back to the futures

Unconventional, creative and hailed as a brilliant strategist, Brian Price is behind a deal to establish a new derivatives exchange, writes Matt O'Sullivan.

BRIAN Price knows a lot about greed and revenge.

He thrived amid the "gangland warfare and manic chaos" of the trading floor of the Sydney Futures Exchange in the 1980s.

He wrote about it in the original story for Robert Connolly's 2001 film, The Bank, the tale of a young market trader who seeks revenge for the repossession of his father's farm.

Now the hedge funds manager and "market-risk strategist" for some of this country's richest individuals is behind a deal to establish a commodities and energy derivatives exchange for the Asian region in Sydney.

The parallels between his life and The Bank are uncanny. He admits the financial thriller encapsulates "everything in my sphere of life" because "they are the people I come across in my life because that's what business is all about".

But he denies his latest venture is part of a plan to seek revenge on the Australian Stock Exchange and Sydney Futures Exchange, which are in the process of merging. "As opposed to revenge, it would be the challenge of it," he says. "We have a macro-branding strategy; we have high-level personal resources … we have capital; we have time. Personally, I don't need the money."

All the same, it's a timely entry for a new participant, amid broker fears that the $5 billion merger of the SFE and ASX will create a pricing monopoly.

A local futures trader who declined to be named said: "Everybody you speak to is totally opposed to the SFE. If (Price) can get the locals on board to get the liquidity … and can provide the volume we are all for it."

The regulator, the Australian Competition and Consumer Commission, chaired by Graeme Samuel, has given the nod to the merger in contrast to the rejection of an identical takeover in 1999 by Samuel's predecessor, Allan Fels. But it is Treasurer Peter Costello who must make the final call.

In its report, the ACCC concludes that both bodies are monopolies but that each operates in separate compartments of the same general market.

The regulator's hope appears to be that competition will emerge from elsewhere, in which case it should rejoice at the arrival of Brian Price.

Price is about nine months away from opening the Commodities and Agricultural Electronic Derivatives Exchange (cumbersomely known as Com-Agex Asia) in the former Burns Philp building just across the road from the ASX in Sydney.

"(The furore over the merger) gives us a more receptive environment definitely, but we are not competing with their product business," he says.

As such, the new exchange will not be trading three- or 10-year bonds. "At this stage, it's not in our business model," Price says. "Setting up an exchange to take business from the SFE is a bad idea. The SFE still provides a viable marketplace, but we don't need to take their business to be successful."

He estimates it will cost $20 million to establish the exchange, but adds: "We're yet to determine how much (capital) we're going to need for the marketplace to think it's a viable exchange".

The prospect of a new exchange has received a lukewarm response from some market participants, who point to the collapse of the Australian Derivatives Exchange after just 11 weeks of operation in 2001.

But Price rebuffs this. "They tried to build the Panama Canal once and 100,000 people died, and they came back 20 years later and built it," he says. "Ours is a different business model, a different strategy, a different time."

Advances in front-end technology — notably broadband whereby markets can be accessed from home — have opened the door to a wide range of investors.

"Computer technology has made it phenomenally more achievable," he says. "I can't think of any businesses in the world that have changed this substantially."

Price, born in Canada, is a veteran of the derivatives market. He was there at the beginning when in 1984 he first walked into the chaos of the SFE's trading room floor for Trans City Holdings.

In 1989, Price left the floor to establish Standard Options, effectively a hedge fund that would later become Iron Mountain.

But he's not your typical corporate type. He'd favour a counter meal at a pub near his office over a long business lunch, and it's no surprise that a man who describes himself as a "moderate socialist" lists the Gaza Strip, the West Bank, Colombia and Rwanda as places he has visited because "that is where humanity really is".

"I don't see myself as a member (of the business elite). I am certainly capable but I don't do the schmooze … I don't need the corporate veil to carry my ability."

Reward Management's investment director, Brian Ingham, says a new exchange could be viable if it focuses on a niche market but doubts remain over its ability to attract the trading volumes to justify the capital investment.

Price retorts: "When people say that the ADX failed, rather than getting despondent, I get excited because it creates a challenge."