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Hi All RT's,
If the exchanges go public, and members become owners, I assume current
members would be given shares of stock, since they have already purchased
their seat. This would be similar to partnership going public, i.e.
Goldman-Sacks.
Since it is natural for owners (former members) to want to make a profit
while not paying for services, and since it is equally natural for large
institutional investors to demand and get low fees, guess who will be asked
to provide the profits and how.
Do they really believe that small investors can afford to solely support the
exchanges, especially in an extended bear market when they run for cover?
After every major down market it has taken years for volume to come back to
pre-crash levels. Imagine both a declining market and a reduction in
volume. Will the exchange go out of business if it can not make a profit?
File for bankruptcy? Get a government bailout?
Good luck and good trading,
Ray Raffurty
----- Original Message -----
From: comdytrd <comdytrd@xxxxxxxxxxxxx>
To: Real Traders Forum <realtraders@xxxxxxxxxxxx>
Sent: Thursday, July 22, 1999 9:22 AM
Subject: Fw: CBOT for Profit
>
> -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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