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Filed by Board of Trade of the City of Chicago, Inc. (CBOT)
Subject Company -- Board of Trade of the City of Chicago, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
File No. 132-01854
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The following letter was distributed to CBOT members and membership interest
holders on September 20, 2000 and is currently available on the CBOT's Internet
and Intranet sites, MemberNet and OnBoard.
September 20, 2000
RE: ACTIONS TAKEN BY THE BOARD OF DIRECTORS
Dear Fellow Members:
I want to inform you of three critical decisions made yesterday by your Board of
Directors that impact the strategic direction of our Exchange.
1) Side-by-side trading of agricultural contracts: Based on a recommendation
from the Business Development Committee and the Board of Directors of e-CBOT,
the Board unanimously approved the listing of CBOT agricultural complex
products during all hours of operation of the a/c/e trading platform,
including side-by-side with our open outcry session. This is subject to
approval by membership vote.
Offering our premier agricultural contracts in such a manner will satisfy
member and customer demand for increased access to these products, as well as
work to thwart any potential competitive threats. This also will bring
uniformity to the electronic trading hours for all of our product groups.
Management will come forward with an implementation plan that addresses the
timing of the launch of this initiative, and how we deal with critical issues
such as the release of government reports.
2) Reduction in the size of the Board of Directors and Nominating Committee: The
Board overwhelmingly approved a recommendation from the Executive Committee
to amend our charter and bylaws to reduce the size of the Board from 25
regular voting members to 16, and to reduce the size of the Nominating
Committee from seven to five. This is subject to approval by membership vote.
This is a further move toward demutualization and better corporate
governance, a goal of our restructuring strategy. This proposal would be
implemented by not holding elections this year to replace the seven member
directors whose terms expire at the end of 2000, including the Second Vice
Chairman, five Full Member seats, and one Associate Member seat. We also
would not hold an election for the seat vacated by Director Riechers, whose
term would have expired in December 2001. In addition, we will fill only one
of the two non-member vacancies that will exist at the end of the year. That
vacancy would be filled according to the existing procedure (nomination by
the Nominating Committee and approval by the Board of Directors) in order to
satisfy the CFTC requirement that at least 20% of the regular voting members
of the Board be non-members. For the Nominating Committee, we will not hold
elections to replace the two members of the Committee whose terms expire at
the end of the year.
Accordingly, the only election that would be held in December 2000 would be
for the office of Chairman.
3) Pre-Execution Communications: The Board approved a recommendation from the e-
CBOT Board of Directors to expressly permit pre-execution communications in
connection with
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trading on the a/c/e platform. A pre-execution notice was in effect prior to
June 1996 on Project A. Eurex rules permit pre-execution communication, and a
similar notice is in effect for other competing electronic trading systems.
The Board also approved seeking confirmation from the CFTC that option
trading on a/c/e which utilizes a pre-execution communication system (i.e., a
subscriber network as described) would be permissible under CBOT rules and
regulations. The Board also agreed to delay implementation of this program
for 45 days.
There will be further communication and information provided to the membership
regarding the issues of side-by-side trading of our agricultural contracts, and
on the issue of reducing the size of the Board of Directors. Again, both issues
are subject to membership approval.
In the interim, please feel free to contact me if you have any questions on the
decisions made by your Board of Directors as outlined above.
Sincerely,
David P. Brennan
The CBOT urges its members and membership interest holders to read the
Registration Statement on Form S-4, including the proxy statement/prospectus
contained within the Registration Statement, regarding the CBOT restructuring
referred to herein or in connection herewith, when it becomes available, as well
as the other documents that the CBOT has filed or will file with the Securities
and Exchange Commission, because they contain or will contain important
information. CBOT members and membership interest holders may obtain a free copy
of the proxy statement/prospectus, when it becomes available, and other
documents filed by the CBOT at the Commission's web site at www.sec.gov, or from
the CBOT by directing such request in writing or by telephone to: Board of Trade
of the City of Chicago, Inc., 141 W. Jackson Blvd., Chicago, Illinois 60604-
2994, Attention: Office of the Secretary, Telephone: (312) 435-3605, Facsimile:
(312) 347-3827. This communication shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of securities in
any state in which offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such state. No
offering of securities shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as amended.
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The following publication was distributed to CBOT members and membership
interest holders on September 20, 2000, and is currently available on the CBOT's
Intranet sites, MemberNet and Onboard.
The Board of Directors of the Chicago Board of Trade at its regular meeting on
Tuesday, September 19, 2000 took the actions summarized below.
. . .
Based on recommendations from the Business Development Committee and the Board
of Directors of e-CBOT, unanimously approved a proposal to enable the listing of
CBOT(R) agricultural complex products for electronic trading during daytime
hours of operation of the a/c/e trading platform, including side-by-side with
the open outcry session.
Under Rule 9B.02 the electronic trading of agricultural contracts during the
6:00 a.m. to 6:00 p.m. timeframe is subject to approval by a vote of the
membership. Complete details with respect to this enabling membership vote
proposition will be forthcoming.
. . .
Based on a recommendation of the Executive Committee, and consistent with the
Exchange's restructuring strategy of moving toward demutualization and more
streamlined corporate governance, approved reductions in the size of the Board
of Directors and the Nominating Committee. Under this proposal the number of
regular voting Board members would change from 25 to 16, and the number of
Nominating Committee members would change from 7 to 5.
These reductions would be accomplished by not filling vacancies in the Second
Vice Chairman, Director and Nominating Committee positions which ordinarily
would be filled through
the December 2000 Annual Election process. (A December 2000 election would be
held for the Officer of Chairman of the Board.) In addition, the Board would
appoint one, rather than two, non-member "public" directors for new term
commencing in 2001.
The Charter, Bylaws and Rule changes needed to implement this proposal will be
subject to a vote of the membership. Complete details will be forthcoming.
The Board approved this proposition for a vote of the membership by a vote of 18
"Aye" and 5 "Nay", recorded as follows:
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09/19/00
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<TABLE>
<S> <C> <C> <C> <C> <C>
Director Cahnman Aye Director Manning Aye
Cashman Aye McMillin Aye
Cermak Aye Michel Aye
Corvino Aye Niciforo Aye
Curley Aye Sorkin Nay
Filipowski Aye Thompson Aye
Hamada Aye Wallace Aye
Hersch Nay Walter Aye
Kurzydlo Nay Weems Nay
Lavender Nay
Lee Aye
Levin Aye
Second Vice Chairman Ryan Aye
First Vice Chairman Carey Aye
</TABLE>
The CBOT urges you to read the Registration Statement on Form S-4, including the
proxy statement/prospectus contained within the Registration Statement,
regarding the CBOT restructuring, when it becomes available, as well as the
other documents that the CBOT has filed or will file with the SEC, because they
contain or will contain important information. CBOT members and membership
interest holders may obtain a free copy of the proxy statement/prospectus, when
it becomes available, and other documents filed by the CBOT at the Commission's
website at www.sec.gov, or from the CBOT by directing such request in writing or
by telephone to: Board of Trade of the City of Chicago, Inc., 141 W. Jackson
Blvd., Chicago, Illinois 60604, Attention: Office of the Secretary, Telephone:
(312) 435-3605, Facsimile: (312) 347-3827. This communication shall not
constitute an offer to sell or the solicitation of an offer to buy, nor shall
there by any sale of securities in any state in which offer, solicitation or
sale would be unlawful prior to registration or qualification under the
securities laws of any such state. No offering of securities shall be made
except by means of a prospectus meeting the requirements of Section 10 of the
Securities Act of 1933, as amended.
. . .
Approved the following based on recommendations of the e-CBOT Board of
Directors:
- Express permission of pre-execution discussions in connection with trading
on the a/c/e platform. (Comparable provisions were in effect for Project
A(R) prior to June 1996, and are in effect currently for other electronic
trading systems). (Subject to CFTC review.)
- A request for CFTC confirmation that option trading on a/c/e which utilizes
a pre-execution communication system (i.e. - a subscriber network) would be
permissible under CBOT rules and regulations. (This interpretation is
subject to CFTC review and will not be implemented in less than 45 days.)
The Board approved these actions by a vote of 18 "Aye" and 4 "Nay", recorded as
follows:
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09/19/00
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<TABLE>
<S> <C> <C> <C> <C> <C>
Director Cahnman Aye Director Manning Aye
Cashman Aye McMillin Aye
Cermak Aye Michel Aye
Corvino Nay Niciforo Aye
Curley Aye Sorkin Nay
Filipowski Aye Thompson Aye
Hamada Aye Wallace Aye
Hersch Aye Walter Aye
Kurzydlo Nay
Lavender Nay
Lee Aye
Levin Aye
Second Vice Chairman Ryan Aye
First Vice Chairman Carey Aye
</TABLE>
. . .
Based on a Finance Committee recommendation, approved a dues waiver program for
cases where members have multiple, non-delegated memberships. This program is
scheduled for implementation beginning with the 4th quarter of 2000.
. . .
Received and accepted the Chief Financial Officer's reports concerning the
financial statements of the Exchange and of Ceres Trading Limited Partnership
("Ceres") for the eight months ended August 31, 2000.
. . .
Considered reports from the Executive Committee and from Exchange management
which recommended that the Ceres Foreign Consultancy Division be dissolved. The
reports noted that the Division has no foreseeable prospects for meaningful
profits or for repaying prior operating losses, and that the Division's goal of
deriving profits from initiatives with foreign exchanges could be pursued within
a restructured CBOT.
In accordance with the recommendations presented and on behalf of the Exchange
as General Partner of Ceres, the Board authorized the dissolution of the Foreign
Consultancy Division.
. . .
Consistent with the CBOT's restructuring strategy, approved and authorized the
transfer of the general partnership interest in Ceres from the CBOT to
Electronic Chicago Board of Trade, Inc. ("e-CBOT").
. . .
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09/19/00
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Based on recommendations of the Business Development Committee, approved
regulation changes to modify various delivery specifications for Corn and
Soybean contracts in the following areas:
- to increase storage rates;
- to decrease maximum certificates allowed to be issued;
- to require the maker to include barge stevedoring in fob charge;
- to continue storage charges through load-out;
- to reimburse maker expenses if loading orders are canceled;
- to allow initial deliveries in any quantities; and
- to require shippers to quote a price at which they will either buy shipping
certificates or sell grain to make up the balance for load-out in the event a
shipping station has less than eleven shipping certificates outstanding.
Subject to CFTC approval.
The revisions would be effective December 1, 2001 for Corn and November 1, 2001
for Soybeans. Further details will be forthcoming.
. . .
In coordination with a MidAmerica Commodity Exchange ("MidAm") Board of
Directors decision, approved a recommendation that the designated trading
location for MidAm metals contracts be changed from the MidAm Exchange Floor to
the CBOT(R) metals pit in the Mansfield Room.
This proposal includes a reciprocal temporary trading privilege feature (subject
to CFTC review). The CBOT would grant to MidAm members temporary trading
privileges in CBOT metals for two years. The MidAm would grant to CBOT
Associate Members and IDEM and COM Membership Interest holders temporary trading
privileges in MidAm metals for two years. (CBOT Full Members already have
privileges in all MidAm contracts.)
These changes will be implemented as soon as practicable. Further details will
be forthcoming.
. . .
Confirmed the pre-holiday trading schedule for the a/c/e electronic trading
platform in connection with Columbus Day, 2000. The overall CBOT schedule will
be as follows:
Friday, October 6 Open outcry Financial and Catastrophe Insurance
contracts close at 12:00 noon. All other open outcry
contracts close at their regular times.
Financial, Stock Index and Metals contract electronic
trading (a/c/e system) closes at 4:00 p.m. regular
time.
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09/19/00
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Sunday, October 8 Overnight a/c/e closed for Financial contracts only.
All other overnight a/c/e trading (Agricultural, Stock
Index and Metals contracts) has a normal schedule.
Monday, October 9 Open outcry Financial and Catastrophe Insurance
contracts closed.
Daytime a/c/e Financial contract trading closed.
All other contracts (Agricultural, Stock Index and
Metals) have normal open outcry and a/c/e trading
schedules.
. . .
Approved the following changes in committee appointments:
Regulatory Compliance Committee
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Remove: Joel R. Riechers
Strategy Committee
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Remove: Joel R. Riechers
Municipal Bond Index Pit Committee
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Remove: Leonard H. Hoffman
Municipal Bond Options Index Pit Committee
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Remove: Leonard H. Hoffman, Chairman
Add: Panayotis E. Arvanitis, Chairman
Soybean Options Pit Committee
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Add: Edmund Anthony DeNapoli
Treasury Bond Options Pit Committee
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Remove: David S. Shorr, Co-Vice Chairman
Douglas R. Terry
Donald Weisberg
Add: Leonard A. Zaban
# # #
09/19/00
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