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-Board of Trade considering reorganizing....of possible interest
July 21, 1999
Dear Fellow Member:
The CBOT of Directors, at my urging, voted yesterday to begin the process of
preparing an exchange-restructuring plan, in order to allow us to better
realize the value of the CBOT to the members.
The measure passed by the Board stated:
Adoption of a for-profit structure by the CBOT;
Demutualization, i.e., the separation of ownership (equity) and trading
rights of each membership;
Monetization of ownership component through private or public investment;
Preservation of existing trading rights (including the Full Member's CBOE
exercise right).
Let me assure you at the outset that the plan we develop would eventually
have to be approved by the Board of Directors and of course approved by the
membership. I want to keep you apprised of important developments in the
process so that any eventual decisions by the membership are based on the
facts.
There is still a tremendous amount of research and discussion necessary
before a specific for-profit restructuring plan is brought to the membership
for your consideration. However, the unprecedented competitive environment
we face dictates beyond doubt that we need to consider alternative
structures. We need the resources and flexibility to assure that our
customers continue to prefer using CBOT markets rather than our competitor's
systems. Frankly speaking, our current governance structure does not allow
us to enact decisions and mobilize financial resources with the speed
required in today's electronic marketplace. It worked well for 150 years,
but it is not the structure a company would use if starting a successful new
exchange today. We must face the realities in the global marketplace and
seriously explore the alternative.
There will be a serious effort to assess the financial possibilities of any
restructuring. I believe we have a responsibility to find out what sort of
value could be placed on the CBOT's member's holdings. At this stage, we
should determine how to realize the value of a restructured CBOT, while also
maintaining all existing trading opportunities. The approach to be studied
would involve unbundling the trading privilege (including the CBOE exerciser
right) from equity ownership. The membership equity could then be monetized.
I am committed to devoting time, energy, and resources to make sure that the
CBOT, and its members, are positioned to compete and grow in the 21st
century. A member Task Force (below) is charged with developing a plan for
the restructuring. They will participate in all aspects of the work
analyzing alternative structures and monetization opportunities.
CBOT Restructuring Task Force:
David P. Brennan, Chairman
Charles P. Carey Joseph Niciforo
David J. Fisher Edmund J. O'Connor
David F. Goldberg James J. O'Connor
Neal E. Kottke Michael P. Ryan
Thomas E. Neal
I will continue to report to you first-hand the progress we are making on
the restructuring and the pros and cons associated with change. In time, we
will hold meetings with members to further the communication process. As
always, the lines of communication remain accessible and open. Healthy
dialogue will make sure that we leave no stone unturned in our search for
the best answers.
Sincerely,
David P. Brennan
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