On Tuesday, October 17, 2006, Chicago's two major futures exchanges, the Chicago Mercantile Exchange and the Chicago Board of Trade, announced an $8 billion merger. We think the merger is good news for the City.

We also think the City should impose specific community development goals on the merged entity, much like the Community Reinvestment Act (CRA) imposes on banks. When banks merge, CRA regulations require banking authorities to certify that the banks involved do not have a history of discriminating against persons of color or low income persons. I am not sure the CME or CBOT would pass certification.

CRA has stimulated billions of dollars of profitable, high social impact lending, provided to underserved communities nationwide. In this way, the Act encourages depository institutions (banks and thrifts) to help meet the credit needs of the communities in which they operate.

Given this, in exchange for the City's blessing, the merged entity should be required to help meet the capital needs of small, disadvantaged businesses located in Chicago. To do this, we suggest the Exchange create a Chicago Business Micro Stock Exchange, modeled on the work pioneered by this years winner of the Nobel Peace Prize, Muhammad Yunus and the Grameen Bank. Equity capital, or shares in these micro businesses would be traded on a Micro Business Stock Exchange created and managed by the Board and the CME. The Exchange would provide the framework for the provision of small amounts of equity capital to micro businesses in Chicago. To make things easier and to enhance the probability of success, we suggest the initiative focus specifically on disadvantaged businesses operating on the South Side of the City.

The mechanics are simple: small business with capital needs prepare business ready financing proposals that are put before investors on a trading floor managed by the Exchange. Investors review the businesses and their plans and decide whether or not to invest. The plans and the businesses themselves would be authenticated by a set of independent third parties, say, the City Treasurers Office, Operation PUSH, and representatives from the local Minority Business Opportunity Center. Terms of any investment would be determined by a standardized micro business investment contract, much like a small business futures contract. The contract would allow for off exchange, "on the curb" modification and tailoring.

Our suggestions are specific, fit well within the business activities and framework of the exchanges, and will give the merged entity a competitive advantage over the long term.

This is just a very rough idea, in need of refinement. Perhaps the free market economists at my alma mater, the University of Chicago, could be persuaded to help. After all, this Exchange puts free market theories to their ultimate test: if legitimate, legal free market institutions don't work on the South Side of Chicago, why would they work in, say, Iraq?