According to Chicago Mercantile Exchange (CME) chief executive officer Craig Donohue, the CME is a significant indicator of a future of substantial growth in the futures industry. "In 2004 we've had volume records in each and every one of our major product lines," he said in a speech at the Futures Industry Association Law & Compliance Division luncheon on Tuesday in New York. Donohue added that the CME traded $463 trillion last year, and it traded more in the first two weeks of 2004 than the New York Stock Exchange will in any year.
Donohue asserted that the CME also made substantial strides in electronic trading. "When I first took over as CEO, we were roughly 48 or 49 percent electronic. At the end of this year we reached 70 percent, and as of January-February we're actually in excess of that," he said.
Donohue believes that one of the main growth drivers is the transformation of the CME from a member-owned organization to a publicly traded exchange. The CME went public in December 2002. Jodi Burns, a senior analyst at Boston-based research firm Celent Communications, agrees that the exchange's de-mutualization has brought a number of benefits. "As a de-mutualized exchange, the decision-making process becomes a lot more streamlined," she says. Burns adds that by going public, the CME gained the capital to invest in the creation of new products, the further development of an electronic trading platform and, if it chooses, the pursuit of new acquisitions. "These are things that really weren't available to the Exchange when it was a mutualized organization," Burns says.
Ultimately, the success of the CME's conversion will compel competing exchanges like the Chicago Board of Trade (CBOT) to view the CME as a model, not only in governance but in other areas as well. Much like the CME, the CBOT started as a traditional trading floor. In an effort to move more of its trading toward electronic platforms, it currently is licensing technology from Euronext.liffe.
The CBOT also is in the process of de-mutualization into a for-profit company. On Monday, February 14, the CBOT announced that the Securities and Exchange Commission had approved its proposed restructuring transactions. A proxy statement and prospectus describing restructuring transactions is expected to be distributed to CBOT members shortly, and a member vote on the restructuring transactions is scheduled for April 14.
"We're continuing to see very rapid and dynamic change in the industry, mostly resulting from continued innovation and technology, [as well as] continued deregulation, which allows new competitors to come into the market [and] makes all of us much better," the CME's Donohue said.