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New CME Chairman of the Board Terry Duffy was introduced to the media
yesterday at a luncheon sponsored by the CME and held in their boardroom.
Duffy and CME President and CEO Jim McNulty, with a handful of CME media
relations staff, hosted the luncheon of newspaper, magazine, wire service,
radio and newsletter reporters, including yours truly on behalf of the
newsletter I write.
The new chairman did very well introducing himself, telling his story and
handling the questions from reporters about the events that led to his
becoming chairman and general questions about the future of the CME. The
reporters asked some tough questions, but were generally very gentle with
Duffy. He made a point of thanking them for their kind reception.
Duffy presented himself as a good communicator with the liquidity providers
of the exchange and as an independent chairman who has never worked for
anyone else at the exchange but himself. He brings an impressive resume of
service to the CME, including having served as the Vice Chairman the last 4
years.
He is a floor broker in the hog pit and said he has been working for 10 to 15
years to bring the CME and CBOT together under a common organization. In
fact, in one of his most passionate statements of the luncheon he said, “I
believe the time is right” for a CME and CBOT merging.
He also said, “I embrace technology,” and pledged his continued support for
President and CEO Jim McNulty, who he helped select as part of the CEO search
committee 2 and a half years ago. He wanted to impress on the press this
point, that he supports the work of McNulty and his management team.
Duffy pledged to pay attention to the FCM community and in fact had a meeting
after the luncheon with representatives of the Futures Industry Association,
which had expressed some concern over the lack of FCM representation on the
reconfigured CME board.
There were questions posed about why the CME would want to change chairman
now, ahead of an Initial Public Offering, knowing that Wall Street frowned on
such signs of instability.
I asked myself why he would want to be chairman now after all the success the
CME has had under the leadership and Chairmanship of Scott Gordon. To put it
in market terms, It is as if Terry Duffy were setting himself up for failure
by buying life of commodity highs in the market. Everyone looking at the
chart is figuring the market will turn over. Things are too good; they can
only get worse, right? But he sees something else. And so do I, as I have
written about here.
I believe he sees a CME that is poised to continue the historic growth of the
last few years. I believe he sees a CME that is optimizing its current
product and trading platform offerings, innovating by creating new contracts
demanded by the participants of the markets and poised to help consolidate
the U.S. futures industry.
There is much talk around the CME about when Globex is going to have a 1
million-contract day, with records now being set in the 700,000 range. While
1 million contracts in one day on Globex will be a significant milestone for
the exchange, it is but a stepping-stone for the potential the CME holds.
Two million contracts on Globex in one day will not be that far behind the
one million record, in my opinion.
To achieve that type of growth and create the market opportunities necessary
will mean continuing to offer new electronically traded contracts, as well as
optimizing existing markets, both open outcry and electronic.
There is concern in some quarters that because a hog pit broker is now the
Chairman of the CME that the CME will slow the evolutionary process towards a
total electronic trading future. I don't think this is a realistic concern.
The evolution has not stopped with the ascension of Terry Duffy to the
Chairmanship. And if the process goes slower or faster, it is because of the
tremendously complex task it is. Terry Duffy offers himself as someone that
will be able to communicate better or differently than the previous chairman
and the CME members and Board voted that this is something that is important
to them. And they are right. Efficient, open and responsive communication
during a time of change is extremely important. This newsletter itself is
based on the ideal of helping people manage the historic level of change in
the futures and securities industry through the dissemination of information
and commentary. So if there is anyone who understands the importance of
communication to manage change in these industries ( or at least pretends to
) it is me.
The CME is a customer focused organization and their customers on the floor,
their members, have expressed themselves about what their needs are at this
point of the evolutionary process. And that expression has taken the form of
Terry Duffy's Chairmanship. It is capitalistic democracy at work.
One challenge for the new chairman is to understand the changing nature of
the stakeholders in the exchange. The members are the current shareholders,
but there are lots of people and organizations who are stakeholders. I
consider myself a stakeholder in the CME. A good percentage of my income
comes from my customers trading CME products, so I have a great interest in
the CME being the very best marketplace it can.
And when the CME changes to a public company, after completing the IPO, then
they will have new investors with other interests outside of the existing
member/liquidity providers to contend with. This is a hugely complex
transformation. Communications with all the stakeholders will be a
tremendous challenge and Terry Duffy pledged to do just that.
But this is not a challenge for the Chairman alone. It is a challenge for
the entire CME organization. This organization has a new chairman, but
largely the same leadership. It has a very strong board, a tremendously
talented staff and a plan for the future to make it the world's premiere
futures exchange. The new chairman is not going to stand in the way of this,
rather he is going to continue to make it happen. That is what he pledged
and that is what I believe.
Regards,
John J. Lothian
The Price Futures Group, Inc.
Disclaimer: This letter is strictly the opinion of its writer, and not
necessarily those of The Price Group and its management, and is intended
solely for informative purposes and is not to be construed, under any
circumstances, by implication or otherwise, as an offer to sell or a
solicitation to buy or trade in any commodities or securities herein named.
Information is obtained from sources believed to be reliable, but is in no
way guaranteed. No guarantee of any kind is implied or possible where
projections of future conditions are attempted.
Futures and options trading involves risk. Past results are no indication of
future performance.
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