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Filed by the 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
* * * *
The following letter and attachment thereto were distributed to CBOT members and
membership interest holders on September 11, 2000.
September 8, 2000
Re: E-Marketplace Competitive Threats for CBOT Product Sectors
Dear Fellow Member:
Upon my request, the staff has prepared the following summary and current
listing of e-marketplaces that may be potential competitors for the CBOT's
products, as well as their underlying cash markets.
This competitive environment highlights the fact that time was of the essence to
launch the a/c/e platform. Timing will be just as critical in bringing about a
streamlined business governance, and at the same time distributing equity to the
CBOT members.
If you have any thoughts or questions, please do not hesitate to contact me.
Sincerely,
Michael P. Ryan
We urge CBOT 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, or 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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Re: E-Marketplace Competitive Threats for CBOT Product Sectors
It is important to note that it appears that all asset classes (equity, bond,
commodity, etc.) primary and secondary markets have e-initiatives underway. Many
believe that the derivatives industry will get significant competitive threats
from cash market players' e-marketplace initiatives. That is, the primary market
incumbents, most of whom are our customers, will offer futures similar to the
BrokerTec model at sometime in the future.
The goal is an integrated "one-stop" electronic customer transaction experience
with primary market transactions and risk management at one site. Electronic
basis trading, in which offsetting cash and derivatives transactions are
concluded simultaneously, will be offered. The current competitive landscape may
indicate that there will be an upcoming clash of business models as derivative
exchanges offer electronic cash market products and the cash e-marketplace sites
offer futures.
The end result may be consolidation and formation of strategic partnerships,
between exchanges and the major cash market e-marketplace order providers,
information content providers, commerce service providers, and infrastructure
providers.
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FIXED-INCOME SITES
* ALL FIXED-INCOME SECURITIES
<TABLE>
<CAPTION>
SITE WEB ADDRESS OWNERS PRODUCTS
------------------------------------- --------------------- ------------------------------------ --------------------------------
<S> <C> <C> <C>
- BondBook www.bondbook.com - Goldman Sachs, Merrill Lynch, - Investment-grade Corp. Bonds
Morgan Stanley Dean Witter, High-yield Corp. Bonds
Salomon Smith Barney, & Municipal Bonds
Broadcort, Inc. (clearing)
- BondConnect www.bondconnect.com - State Street Corp. - Corporate Debt
Boston Stock Exchange Government Debt
Bridge Agencies
Mortgage-backed Securities
Asset-backed Securities
- BondDesk www.bonddesk.com - Bear Stearns - Treasuries
(BondDesk's broker-dealer Corporates
subsidiaries, BondDesk Trading and Agencies
MuniGroup are responsible for Convertibles
operating the platform.) CDs
Municipal Bonds
E-syndicate for New Issues
- Bond Hub www.bondhub.com Pending completion of the Broker/Dealer application process.
- BondLink www.tradingedge.com - Owner: Trading Edge, - Products: High-yield
Inc. Securities
- Investors: Brentwood - Future Products:
Venture Capital, Media Secondary Markets
Technology Ventures, Emerging Markets
and Technology Municipal Bonds
Crossover Ventures.
- Bond Net www.bondnet.com - The Bank of New York - US Fixed-Income Securities
Treasury
Agency
US Corporate
Yankee Bonds
Supranational Bonds
- BrokerTec www.brokertec.com - ABN Amro, - Repurchase Agreements
Broker tec Europe Banco Santander, Credit Products
Barclays Capital, Interest rate Swaps
Credit Suisse First Boston, Derivatives
Deutsche Bank Securities,
Dresdner Bank,
Goldman Sachs, Lehman Brothers,
Merrill Lynch, Morgan Stanley Dean
Witter, Salomon Smith Barney, and
Warburg Dillon Read.
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
- BuySideDirect www.buysidedirect.com - Intelligent Markets, Inc. - Convertible Bonds (outright
(private, venture-backed technology and swap orders)
company - Oak Hill Venture Partners
is the lead investor.)
- e-Speed www.espeed.com - Cantor & Fitzgerald - US Treasury Bills & Bonds
- European Bonds &
Interest Rate Swaps
Emerging Markets
- Global Futures
OTC Bond Options
Emerging Markets
Commodities
- Eurex Bonds www.eurexchange.com - Joint venture with - Products:
Eurex Owning 70 German government bonds
percent and a
consortium of 10 Basis trades, in which
international offsetting cash and
investment banks derivatives transactions are
owning 30 percent. concluded simultaneously
Straight Cash-Market
transactions
- Future Products:
US Treasuries to Corporate
Bonds.
- Garban-Intercapital www.icap.com - Garban-Intercapital and private - Bonds
investors. Commodities
Currency Options
Derivatives
FX forward, options, & spots.
Futures
Options
Repos
Securities Execution
- LibertyDirect www.libdirect.com - Tullett & Tokyo Liberty, PLC, - All US Treasury Securities
with executions through Liberty Bills
Brokerage, Inc. Notes
Bonds
WI's
Swaps
Rolls
Basis
Repo
- Market Axess www.marketaxess.com - ABN Amro, Bear - US High-grade Corp Bonds
Stearns Chase US High-yield Corp Bonds
Manhattan, Deutsche US Municipal Bonds
Bank Securities, US Agency
J.P. Morgan & Co., Inc., Emerging Markets
and UBS Warburg. Eurobond
Pfandbriefe trading,
inventory, & new issues.
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
- MuniAuction www.muniauction.com - Grant Street Securities - Primary Fixed-income
Securities
Secondary Market Auctions
of Bonds
- OpenBook www.openbook.com - WR Hambrecht & Co. - High-yield Bonds
Convertible Bonds
Municipal Bonds
- Tradebonds www.tradebonds.com - Finacorp Securities in - Treasury
partnership with CMO's
Stone & McCarthy Research Municipal
Associates. Zero Coupons
Corporates
CDs
- TradeWeb www.tradeweb.com - Bear Stearns - Bills
Notes
Bonds
Strip
</TABLE>
- CORPORATE BONDS ONLY
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<S> <C> <C> <C>
- LIMITrade www.limitrader.com - Owner: LIMITrader Securities, - High-yield Corporate Bonds
Inc. High-grade Bonds & New Issues
Issues
- Investors: Sanford R.
"Sandy"Robertson, Joint Venture for Euro
founder of San Bank Papers and Asset-
Francisco-based backed Securities
investment banking
firm Robertson,
Stephens & Company,
LLC, First Call
Corporation founder
Jeffrey P. Parker,
SOFTBANK Technology
Ventures, and Zerp
Stage Capital Co.
</TABLE>
- MORTGAGE-BACKED SECURITIES
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<CAPTION>
<S> <C> <C> <C>
- VisibleMarkets www.visiblemarkets.com - Brian Robertson, CEO - Mortgage-backed & Asset
Sam Choi, COO backed Securities
Corporate Bonds
</TABLE>
- MUNICIPAL BONDS ONLY
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<CAPTION>
<S> <C> <C> <C>
- eBondTrade www.ebondtrade.com - Chuck Gruye - Investment-grade Municipal
Bonds
- MuniAuction www.muniauction.com - Grant Street Securities - Primary Fixed-income
Securities
Secondary Market Auctions
of Bonds
- MuniGroup www.munigroup.com - Goldman Sachs Group, Inc., - Municipal Bonds
Inc., BondDesk.com
LLC, Susquehanna
Partners, GP, Paine
Webber Group, Inc.,
and Bear Stearns & Co.
</TABLE>
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<TABLE>
<CAPTION>
<S> <S> <C> <C>
- TheMuniCenter www.themunicenter.com - Merrill Lynch, - Municipal Securities
Morgan Stanley,
Salomon Smith Barney,
and Chapdelaine
Electronic Brokerage.
</TABLE>
EMERGING MARKETS
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<CAPTION>
<S> <C> <C> <C>
SITE WEB ADDRESS OWNERS PRODUCTS
---- ----------- ------ --------
- Apogean www.apogean.net/ - Robert Hedges, CEO - Fixed-income Securities
Michael Campbell, CTO (All listed on the Emerging
Markets Clearing Corp. site)
www.e-m-c-c.com
</TABLE>
FX
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<CAPTION>
<S> <C> <C> <C>
SITE WEB ADDRESS OWNERS PRODUCTS
---- ----------- ------ --------
- Atriax Not available. - Citigroup, Inc., - Foreign-exchange Services
Chase Manhattan
Corp., Deutsche Bank
AG, and Reuters
Group, PLC.
- CFOWeb www.cfoweb.com - Harpal Sandhu, CEO - FX Spot
Bill Clark, VP FX Forward
FX European Option
Interest Rate Swaps
Caps/Floors
FRA's
Fixed Rate Deposits
- Coredeal www.isma.org - ISMA and 13 investment banks and - The plan is to have 6,000
security houses. international securities
eligible for trading, with
about 8% of that in
government bonds. The
focus is on corporate
bonds.
- Currenex www.currenex.com - TH Lee Putnam Internet Partners, - Spot Transactions
Partners, WR Outright Forwards
Hambrecht & Co., and Even/uneven Forward
funds affiliated with Swaps
donaldson, Lufkin & Options
Jenrette, Inc.
- FXAll www.fxall.com - Bank of America, - FX Spot
The Bank of Tokyo FX Forward
Mitsubishi, BNP
Paribas, Credit Suisse
First Boston, Dresdner
Kleinwort Benson,
Goldman Sachs, HSBC,
J.P. Morgan, Morgan
Stanley Dean Witter,
Royal Bank of Canada,
The Royal Bank of
Scotland, UBS
Warburg, & Westpac
Banking Corporation.
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
- FX Connect www.fxconnect.com - State Street Corp. - FX Spot
FX Forward
- Matchbook FX www.matchbookFX.com - Joint effort - Valhalla - Foreign Currency
Forex, NexTrade ECN,
and
GlobalNetFinancial.com
</TABLE>
SWAPS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SITE WEB ADDRESS OWNERS PRODUCTS
---- ----------- ------ --------
- BrentBroker www.brentbroker.com - David Salomon (CEO), - Physical Crudes
Stephen Hendel and Crude Swaps
Stephen Semlitz (Hess Calendar Spread Swaps
Energy Trading Co.), Product Swaps
and Vincent Viola
- BuySideDirect www.buysidedirect.com - Intelligent Markets, Inc. - Convertible Bonds (outright
(private, venture- and swap orders)
backed technology
company - Oak Hill
Venture Partners is the
lead investor.)
- Derivatives Net, Inc. www.derivativenet.com - Raymond May and Shawn Dorsch - Interest Rate Swaps
(Blackbird) and Shawn Dorsch (former Interest Rate Basis Swaps
J.P. Morgan swaps Forward Rate Agreements
traders
- LibertyDirect www.libdirect.com - Tullett & Tokyo Liberty, PLC, - All US Treasury Securities
PLC with executions through Liberty Bills
through Liberty Brokerage, Inc. Notes
Brokerage, Inc. Bonds
WI's
Swaps
Rolls
Basis
Repo
- SwapsWire www.swapswire.com - BNP Paribas, Chase Manhattan, - US$ and Euro interest rate
Chase Manhattan, Citigroup swaps
Credit Suisse First
Boston, Deutsche
Bank, Goldman Sachs,
J.P. Morgan, Merrill
Lynch, Morgan Stanley,
UBS Warburg.
</TABLE>
FUTURES EXCHANGES' E-MARKETPLACES
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<CAPTION>
<S> <C> <C> <C>
SITE WEB ADDRESS OWNERS PRODUCTS
---- ----------- ------ --------
- BTEX (BrokerTec) www.brokertec.com - BTEX, an affiliate of - Futures (block trades,
BrokerTec Global, LLC, exchanges of futures for
which includes 12 of physicals, and exchanges of
the world's largest debt futures for swaps.)
and capital markets
dealers as its
shareholders.
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
- CME www.cme.com - CME - TBD
- eNYMEX www.enymex.com - eNYMEX in alliance - Swaps contracts in oil,
with Andersen petroleum, natural gas, and
Consulting. electricity, with some spot
cash market products.
- FutureCom Exchange www.futurecom.org - Texas Limited - Live cattle and options.
Partnership
- LIFFE.com www.liffe.com - LIFFE and UK private investors. - STIRS
LIFFE CONNECT Bonds
Swaps
Equities
Financial Options
- NYBOT www.nybot.com - New York Board of - TBD
Trade
</TABLE>
OPTIONS ELECTRONIC EXCHANGE
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<CAPTION>
<S> <C> <C> <C>
SITE WEB ADDRESS OWNERS PRODUCTS
---- ----------- ------ --------
- International www.iseoption.com - Bill Porter & Marty Averbuch - Options
Securities Exchange
(ISE)
</TABLE>
NON-FINANCIAL (AGS) E-MARKETPLACES
- GRAIN
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SITE WEB ADDRESS OWNERS PRODUCTS
---- ----------- ------ --------
- Rooster.com www.rooster.com - Cargill, - Grains
Cenex Harvest States
Cooperative, and
DuPont.
- AgEx www.agex.com - Royce Nicolaison & - Almonds
Brian Tormey Walnuts
Rice
- AgriPlace www.agriplace.com - Verida Internet Corporation - Grains
Inputs
- CyberCrop www.cybercrop.com - Internet Capital Group - Corn
Wheat
Soybeans
- e-markets www.e-markets.com - Private Ownership. - Secure Bid Exchange
Cash Grain Exchange
- Internet Commodity www.icecorp.com - Private Ownership. - Grain & Feed Commodities
Exchange (ICE)
</TABLE>
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- LIVESTOCK
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<CAPTION>
<S> <C> <C> <C>
SITE WEB ADDRESS OWNERS PRODUCTS
---- ----------- ------ --------
- Emerge Interactive www.emergeinteractive.com - Backers: - CattleInfoNet
------------------------- Safeguard Scientifics,
Internet Capital Group, and XL
Vision.
- Farms.com www.farms.com - Merger between - Farm Inputs
farms.com & Cattle, Hogs, & Poultry.
eHARVEST.com.
</TABLE>
- POULTRY
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SITE WEB ADDRESS OWNERS PRODUCTS
---- ----------- ------ --------
- Cargill, Inc. and a TBD - IBP, Inc., Cargill Inc., - Meat Products
Consortium. Smithfield Foods, Inc., Poultry Products
(Name of online and Farmland Service and Information
exchange TBD) Industries, Inc.
</TABLE>
AG PRODUCTS & SERVICES
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<CAPTION>
<S> <C> <C> <C>
SITE WEB ADDRESS OWNERS PRODUCTS
---- ----------- ------ --------
- TheAgZone www.theagzone.com - TAZ Group - Ag Products
- XSAg www.xsag.com - XS, Inc. - Ag Input Products
(Chemicals, Seed, and
Fertilizer.)
</TABLE>
ENERGY
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SITE WEB ADDRESS OWNERS PRODUCTS
---- ----------- ------ --------
- Altra e2 www.altra.com - Williams of Tulsa and - Natural Gas
commerce Duke Energy of Crude Oil
Houston. Wholesale Electricity
- BrentBroker www.brentbroker.com - David Salomon (CEO), - Physical Crudes
Stephen Hendel and Crude Swaps
Stephen Semlitz (Hess Calendar Spread Swaps
Energy Trading Co.), Product Swaps
and Voncent Viola
- Enermetrix Exchange www.enermetrix.com - Private Ownership. - No product list available
on site
</TABLE>
7
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
- EnronOnline www.enrononline.com - Enron, publicly owned, with a - Natural Gas
private list of investors. Power
Crude Oil
Refined Products
Liquefied Petroleum Gases
Petrochemical
Coal
Plastics
Emissions Allowances
Pulp
Paper
Weather Derivatives
Bandwidth
Metals
- HoustonStreet Exchange www.houstonstreet.com - Exchange-majority is - Wholesale Electricity
owned by BayCorp Crude Oil
Holdings. Refined Products
- Intercontinental Exchange www.intercontinentalexchange.com - Morgan Stanley Dean - Petroleum
Witter, BP Amoco, Precious Metals-based
Deutsche Bank, Products
Goldman Sachs, Royal Global Natural Gas
Dutch/Shell Group Electrical Power
Societe Generale, and Base Metals
the Totalfina Elf Group
- Pantellos www.pantellos.com - American Electric - Electric
Power, Cinergy, Natural Gas
Consolidated Edison, Natural Gas Pipeline
Inc., Duke Energy,
Edison International,
Entergy, FirstEnergy,
Corp., FPL Group,
PG&E Corp., Public
Service Enterprise
Group, Reliant Energy,
Sempra Energy,
Southern Company,
TXU, and Unicaom. New
participants: Carolina
Poeor & Light, DTE
Energy, Dominion
Resources, El Paso
Energy, GPU, Inc., and
Generation.
</TABLE>
METALS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SITE WEB ADDRESS OWNERS PRODUCTS
---- ----------- ------ --------
- Deutsche Borse TBD - Partner ship between Deutsche - Non-ferrous Metals
& EMETRA Deutsche Borse and
(Name of the EMETRA.
exchange TBD)
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
- EnronOnline www.enrononline.com - Enron, publicly owned, - Natural Gas & Crude Oil
with a private list of Power
investors. Refined Products
Liquefied Petroleum Gases
Petrochemical
Coal
Plastics
Emissions Allowances
Pulp
Paper
Weather Derivatives
Bandwidth
Metals
- e-STEEL www.e-steel.com - Michael S. Levin, CEO - Prime & Non-prime
and founder of e-STEEL Products
- Intercontinental Exchange www.intercontinentalexchange.com - Morgan Stanley Dean - Petroleum
Exchange Witter, BP Amoco, Precious metals-based
Deutsche Bank, products
Goldman Sachs, Royal Global natural gas
Dutch/Shell Group, Electrical Power
Societe Generale, and Base Metals
the Totalfina Elf Group
</TABLE>
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The following is the text of a presentation delivered on May 31, 2000 and is
currently available at the Office of the Secretary of the CBOT.
Thank you Tom. Good afternoon and I say thanks to all of you for taking the time
to come and listen. It is my pleasure to meet with FIA's Chicago Division to
discuss the Board of Trade's initiatives and particularly its historic
restructuring proposal.
With more than 152 years of operations, the Board of Trade is clearly a leader
in the global derivatives markets. It has more than a 40% U.S. market share and
as such it continues to be one of the worlds foremost derivatives exchanges.
With an 18% share of the globally listed derivatives markets the Board of Trade
is one of the strongest and most reliable brand names in the industry. I have
always felt that one of the Board of Trade's strongest attributes has been its
brand name. As I have traveled the worldwide it is known everywhere. I am
committed to work with the Board of Directors, the Members and the Senior
Management team to utilize this strength as we move through our restructuring
initiative, which I will discuss shortly. However insuring our success has
become increasingly challenging in the face of global change. A number of
factors; 1) technology innovations. You all are aware of technology changes
indeed the things that were unique 18 months ago are common place today and
probably 18 months from now will no longer be utilized. We are all aware that a
mutual or cooperative govern structure is no longer one that works for fast
paced competitive environment changes must be made now and they must be made
quickly and they must be made in response to other initiatives. And we face
formable competition. The potential electronic competitors they include as we
all know Cantor, which as introduced an electronic trading platform for futures.
It is true volume may be negligible but they are a serious competitive force and
many of you know of their number of their new initiatives to increase their
activity. Over-the-counter markets they have grown over 2,500% in the last ten
years. BrokerTec another formable competitor are backed by fourteen of the
largest U.S. and European investment banks and many of those backers are indeed
our members, individuals who supply a large share of the Board of Trade's fees
and volume. Since the mid 1990's open out cry volume worldwide has declined
about 8% and electronic trading has grown by about 24%. Based on industry trends
outside of the US electronic trading is expected to account for virtually all of
the overseas trading in the near future.
Now at first glance what I have described may look bad. But the Chicago Board of
Trade has thrived for over 150 years. And we have been successful for all of
these years. Because one we have the most liquid markets created by the best
local traders. Let me emphasize that. I think one of the greatest assets for
Chicago Board of Trade and indeed for the American markets is its natural
resource of traders. It's individuals, its thousands of individuals who have
come to the floor and make markets and trade day in and day out. We have price
transparency with daily mark-to-market. And the Board of Trade is unique and has
an advantage, and I must say this because our trades are cleared by a Triple-A
clearinghouse. Just has we have changed with the introduction of financial
futures a few years ago. The Board of Trade is prepared to do what it must meet
and beat
<PAGE>
the competition. I assure you of that. Chairman Brennan said it best in an
interview with the Tribune a few weeks ago. He said "We've made a lot of
progress, but we still have a lot to do. It is not always easy. It is not always
pretty. Change is difficult for some people." Change is difficult, we all know
that from our personal experiences and the organizations with which we are
associated. But it must be done and I assure the Board of Trade will do it. What
have we done so far? Eurex, a premiere electronic trading platform. The Board of
Trade has developed an alliance with Eurex whereby it will offer its products
effectively on the same screen in major financial markets around the world. It
will utilize the electronic German Swiss platform, which has a very reliable and
advanced trading platform. We focus on launching it later this year. We have
signed up all of our current; we have signed up not all but our major 85 of our
major member firms to the new system. We are using technology to enhance the
Board of Trade's open outcry markets. We are moving towards a paperless trading
floor. We have orders sent via the computer sent straight to the pit. We have
traders utilizing hand held devices in the pit. Now I know some of you said well
we have heard of these electronic enhancements on the floor in the past but what
does it really mean? Let me share with you a few numbers. In the year-to-date we
have filled over 478,000 orders via the electronic order routing that compared
to 210,000 orders in all of 1999. Over 50% of our FMC's use our electronic order
routing technology. Broker's use electronic clerks have filled 30% of Ag orders
an increase of about 20% from just January. And an increase of about 30% of our
financial orders are now filled from January of this year. We have over 300
order routing devices being used, 100 are used on any average day. We continue
to have success with this effort and will continue to focus our energies on
making open outcry markets more efficient. Eurex and electronic order routing
are important initiatives and they are ones we are committed to on behalf of our
members and our customers. But when you look at the big picture, you really see
an industry that is evolving. If the Board of Trade is going to stay ahead of
the competition than we must run the Board of Trade more like a business. We
must focus on restructuring.
Let me share a little background about restructuring. The Board of Trade has
been working on this effort for well over a year. Chairman Brennan, following
his election established a restructuring task force. That task force considered
and reviewed numerous alternatives evaluated them, talked to other exchanges
worldwide. This resulted in a decision by the Board of Directors in January to
demutualize. What does the plan do? It creates two for profit companies. One's
primary focus is on open outcry. And the other on electronic trading. The
current members will have stock in each company. The first company will retain
the open outcry platform of trading with the electronic enhancements that I have
mentioned and will be a closely held for profit company. The second company will
established an electronic capability primarily utilizing the Eurex platform as
we transition from Project A today's Board of Trade electronic trading system.
This company is expected to provide trading opportunities for all of the Board
of Trades contracts plus additional products in an open access environment. The
customers will evaluate how they wish to execute their trades, what system they
wish to use. Our goal is to keep the business at the Board of Trade by providing
the best of both markets. This is simply another phase in the Board of Trade's
tradition of industry leadership. It positions
<PAGE>
the Board of Trade has leaders no matter what direction the risk management
industry may take.
Where are we now in the restructuring process? The members will vote in late
June on the first step of the process. Let me emphasize that. The first step of
the process in late June. This is really a technical step. Today the Chicago
Board of Trade is an Illinois corporation under created by special charter of
the State of Illinois. The first step will move the Board of Trade from Illinois
to Delaware and create it as a non-profit Delaware corporation. The second faze
creating the two complete companies spinning them off creating them for profit
will be voted on later this year. The membership is constantly being updated on
the initiative we had a floor meeting last Thursday, there are meetings with FCM
organizations and groups many of your colleges and associates both in New York
and Chicago. There will be meetings with various pit committees and members and
interest groups such as AM's and lessors. We will continue to do all that we can
to ensure that there is a full understanding of the restructuring proposal
because we are convinced that is what is necessary to move the Board of Trade
forward. What are the long term benefits and strengthens. As I indicated earlier
it would allow the Board of Trade to become a quick business decision-making
organization. They could better anticipate and address the competitive
pressures. It will be easier to arrange strategic alliances. It will enable the
organizations to earn and raise capital to invest in technology and develop new
business and revenues. Whether it is business to business, e-commerce over the
counter franchising capabilities all of these things will be available to the
new Board of Trade in a quick responsive environment.
My role in this process is to one to continue to assist in running the Board of
Trade. Every day we run really two markets an open out cry and Project A. We are
moving forward to complete the development and launch of the Eurex system. I
will move forward to help implement the restructuring and provide the
opportunities for current staff to work in these new organizations. We are
beginning the second phase of the development of a business plan for the
organizations and will involve our staff in that activity. Let me conclude my
remarks by observing again that Chicago Board of Trade has a long and rich
history. It has a tremendous worldwide brand name. It has reinvented itself many
times over the last 152 years to survive. It went through the challenges of the
depressions it traded stocks and bonds in the 30's and 40's. It began trading
financial products 15-20 years ago and many of you are familiar with the
activities of the last 15 years. I have witnessed this changed as an outside
observer and now I am living it as the Interim President. From either
vantagepoint, the message is clear: The Board of Trade must act now! We know
that the 152-year-old structure no longer serves the best interest of our
customers. Our restructuring plan provides the customers with the best of both
worlds - open outcry, electronic, enhancements in the open outcry, business
opportunities for the electronic and it will permit our share holders, our
members today, our shareholders tomorrow to reap the benefits of both
organizations. And while technology continues to challenge our industry I assure
you the Board of Trade is prepared to lead the global marketplace for the next
150 years. In whatever trading venue, with whatever enhancements the customer
chooses with maximum efficiency.
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On a personal note, I am honored to have the opportunity to take part in this
portion of the Chicago Board of Trade's great institutional history.
I thank you for having me today. And I am prepared to take any questions you
might have.
We urge CBOT 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 by means of a prospectus meeting the requirements of
Section 10 of the Securities Act of 1933, as amended.
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