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Discussion Starter · #1 ·
Hello everyone. I have been following and reading this forum for quite sometime but this is my first time posting comments. I find this site to be one of the most interesting and informative sites relating to business and development. Further I love Chicago and want to Thank everyone that has helped make this site such an outstanding resource. It has truly helped me stay connected with everything going on. I felt compelled to give my thoughts regarding what might be (IMHO) one of the most significant business decisions ever made in this city. I realize there have been several conversations in different threads concerning the CBOT/CME merger but I think this is such a significant story it deserves it's own thread. I would like to talk about this situation in further detail because I believe it will make or break this city. I am very concerned about the our future position in the financial and business world IF ICE (not CME) grabs CBOT. Many bad implications here and I would like to discuss further. If there is a specific thread for this already I haven't seen it and please direct me. If not lets talk about this in detail.
 

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Welcome to the forums. I've been posting a lot on this topic in the Chicago Economy Thread. I've also been wondering a lot about this, and I think it was a good idea to start this thread.

That said, I really don't know what's going to happen. I think these CBOT members are being caught up in a proxy battle, and I'm only hoping that they vote the "right" way.

I believe that the ball is in CME's court. They can end this here and now if they outbid ICE, and I believe (from what I've read) it is within their means. However, they appear to be deploying some poker-like strategies and they are certainly making me uneasy. With all of the conflicting press, I can't even begin to guess what's going to happen.
 

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Also posted in the Chicago Economy Thread:

http://www.chicagobusiness.com/cgi-bin/news.pl?id=25453
June 25, 2007
War of words in full swing on CME-CBOT merger
(Reuters) — A war for the hearts, minds and votes of CBOT Holdings Inc. shareholders escalated on Monday, two weeks ahead of a July 9 vote that could decide the fate of the No. 2 U.S. futures mart.

Top officials from the Chicago Board of Trade's parent sent a letter urging shareholders and members to reject overtures from IntercontinentalExchange Inc. and approve a merger with Chicago Mercantile Exchange Holdings Inc.

The proposal from ICE, though it currently values CBOT about $1.3 billion higher than CME's bid, "is uncertain and entails higher risk," CBOT Chief Executive Bernard Dan and Chairman Charles Carey wrote in the letter.

"There is no guarantee that any premium in short-term value based on ICE's current stock price will be there months from now," the letter said.

CME followed up with its own missive, telling CBOT shareholders that ICE "does not have the technology or clearing capabilities to manage CBOT business."

Atlanta-based ICE has proposed that CBOT's derivatives trades would be handled through its U.S. clearing facility at the New York Board of Trade.

NYBOT announced on Monday its trading volume in June had hit 5 million contracts for the first time. But CBOT's daily volume routinely exceeds that amount; average daily volume this month has been almost 5.1 million contracts.

ICE said on Monday it has started to mail proxy materials to CBOT shareholders urging them to reject the CME merger.

If consummated, the ICE proposal "would provide significantly greater financial value than the proposed CME merger," ICE said in its letter.

Meanwhile, the Chicago Board Options Exchange, the largest U.S. options exchange, has postponed a vote on its proposed deal with ICE on the future of "exercise rights" held by some CBOT members, which allow them to also trade equity options at CBOE.

The agreement, announced in May, calls for each full CBOT member to receive $500,000 per trading right if ICE succeeds in buying CBOT Holdings. In a memo to its members dated June 21, CBOE said a membership ballot to approve the deal, scheduled for July 3, was now expected later in July.

In afternoon trading on the New York Stock Exchange, CME was down $1.99, or 0.3%, at $537.96. CBOT was down $3.62, or 1.7%, at $203.92 and ICE was down $2.74, or 1.7%, at $152.82.
 

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I am a delegate of the CBOT (not a voting member) and i'd love to talk about this, obviously. Why do you think ICE would be bad for the exchange, and this city?
^ Mostly because I don't buy into their rhetoric. I don't believe a ICE/CBOT combo would remain a Chicago-based company as they claim they would. Theories abound that New York investment banks are entirely behind ICE's attempt to block this merger from happening--another reason why I have no reason to trust any of their claims. It would be a loss of a major Chicago institution, whereas a CBOT/CME combo would cement Chicago as an international center of futures trading.
 

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^ Mostly because I don't buy into their rhetoric. I don't believe a ICE/CBOT combo would remain a Chicago-based company as they claim they would. Theories abound that New York investment banks are entirely behind ICE's attempt to block this merger from happening--another reason why I have no reason to trust any of their claims. It would be a loss of a major Chicago institution, whereas a CBOT/CME combo would cement Chicago as an international center of futures trading.
I certainly agree with your last statement and am also pulling for a CME merger. However I dont think futures trading would ever leave Chicago, but I dont care to take that gamble either.

At this point its really about money. If ICE keeps upping the ante it will be hard to ignore. But I think the CME will prevail.
 

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I was wondering about the future of chicago in the case that CME wins. They claim to have more overlap in their back office operations than the CBOT/ICE would. Does this mean that CME/CBOT would have more redundancies and thus more jobs lost as a result of that merger? If so, I wonder where those other people would move to. One would hope that many of the jobs would stay within chicago. Also, what do you guys think will come as a result of having the worlds largest and most dominant futures exchange? Do you think more companies would see Chicago as an international business center and move operations here? Will the effect really be that pronounced since both exchanges were already in chicago to begin with? Also, is the ICE commited to move to chicago regardless of the outcome of the bid war? If so, that would make the city even more of a magnet for finance, and perhaps could even hire on some of the jobs lost in the CME/CBOT merger, assuming that happens.
 

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I was wondering about the future of chicago in the case that CME wins. They claim to have more overlap in their back office operations than the CBOT/ICE would. Does this mean that CME/CBOT would have more redundancies and thus more jobs lost as a result of that merger?
I think you have this backwards. My understanding is the back office operations would be a much easier merger with CME than ICE. CME and CBOT have been merging their back office operations for years now.


If so, I wonder where those other people would move to. One would hope that many of the jobs would stay within chicago. Also, what do you guys think will come as a result of having the worlds largest and most dominant futures exchange?
Well Chicago already dominates the global futures trade, no one even comes close.

Do you think more companies would see Chicago as an international business center and move operations here?
yes

Will the effect really be that pronounced since both exchanges were already in chicago to begin with? Also, is the ICE commited to move to chicago regardless of the outcome of the bid war? If so, that would make the city even more of a magnet for finance, and perhaps could even hire on some of the jobs lost in the CME/CBOT merger, assuming that happens.
I'd like to think so. And really hope so if ICE does win.
 

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^ Mostly because I don't buy into their rhetoric. I don't believe a ICE/CBOT combo would remain a Chicago-based company as they claim they would. Theories abound that New York investment banks are entirely behind ICE's attempt to block this merger from happening--another reason why I have no reason to trust any of their claims. It would be a loss of a major Chicago institution, whereas a CBOT/CME combo would cement Chicago as an international center of futures trading.
I have made similar posts. If ICE gets this one they are going out of town within 2 years mark my word.

Like I have said before this one is huge.

Let's hope the greed factor from COBT members is not as great I would expect.
 

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I have made similar posts. If ICE gets this one they are going out of town within 2 years mark my word.

Like I have said before this one is huge.

Let's hope the greed factor from COBT members is not as great I would expect.
greed factor? Its literally hundreds of thousands of dollars difference for full members. More common sense, than greed I think.
 

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greed factor? Its literally hundreds of thousands of dollars difference for full members. More common sense, than greed I think.
I would hope members think about the region and the family roots established in the Chicagoland area if they have any and I would expect that they have.

A half of a million is a rather weak excuse to sell out your entire metro region for a quick bonus.

You can not take it with you and in the long term the CME merger will most likely support their children’s children’s future in Chicagoland better than an ICE run out of town merger that would be created.

The point is do they want the early retirement and the extra vacations that ICE would give them or do the members think about the future and the families stability and wealth that could be generated by being the largest future ... in the world...
 

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I would hope members think about the region and the family roots established in the Chicagoland area if they have any and I would expect that they have.

A half of a million is a rather weak excuse to sell out your entire metro region for a quick bonus.

You can not take it with you and in the long term the CME merger will most likely support their children’s children’s future in Chicagoland better than an ICE run out of town merger that would be created.

The point is do they want the early retirement and the extra vacations that ICE would give them or do the members think about the future and the families stability and wealth that could be generated by being the largest future ... in the world...
^ You are being WAY too idealistic, bnk. Sorry, but most people don't work that way. CME has to win this deal with money, not with some sob story about honor and civic duty
 

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^ You are being WAY too idealistic, bnk. Sorry, but most people don't work that way. CME has to win this deal with money, not with some sob story about honor and civic duty
I agree, and I think his view is way too overdramatic if ICE does win. Like I said, I hope CME does win, but the futures industry will not just disappear if ICE wins. if that was the case CBOT members wouldnt vote for it. Its their lively hood. A very small percentage of traders will just retire if they get more money. Members will not vote to give up the industry.
 

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Discussion Starter · #15 ·
I am a delegate of the CBOT (not a voting member) and i'd love to talk about this, obviously. Why do you think ICE would be bad for the exchange, and this city?
I was hoping to get a response from you since I've read some of what you have said previously and you are at CBOT. I feel that the ICE deal would be bad for Chicago in several ways. First, I strongly believe that Chicago will lose importance as a financial center if the deal goes through. Over the past several years we have already lost several Fortune 500's to Atlanta through mergers. If ICE wins this battle Chicago will lose one of it's strongest assets. All major decisions will be made in Atlanta by ICE and there won't be a need to keep anything here. Further I believe there has been a lot of "sellout" as a result of previous corporate mergers and I don't want to see Chicago as the second string QB. I just see it as another sellout that leads to our markets having no importance. If CME prevails then we create a powerhouse and remain strong. What are your thoughts on this? I just believe there has been a lot of selling out in the name of making a quick buck in Chicago over the past several years. I believe we lose identity, jobs, and importance in the long run.
 

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I was hoping to get a response from you since I've read some of what you have said previously and you are at CBOT. I feel that the ICE deal would be bad for Chicago in several ways.

First, I strongly believe that Chicago will lose importance as a financial center if the deal goes through.

Over the past several years we have already lost several Fortune 500's to Atlanta through mergers. If ICE wins this battle Chicago will lose one of it's strongest assets. All major decisions will be made in Atlanta by ICE and there won't be a need to keep anything here.

Further I believe there has been a lot of "sellout" as a result of previous corporate mergers and I don't want to see Chicago as the second string QB.

I just see it as another sellout that leads to our markets having no importance.

If CME prevails then we create a powerhouse and remain strong.

What are your thoughts on this? I just believe there has been a lot of selling out in the name of making a quick buck in Chicago over the past several years. I believe we lose identity, jobs, and importance in the long run.
Good post.

At least you can see my view point.

I think the word of the day today is sellout.

Outsiders [NY/ATL] would just love a good sell out.
 

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Discussion Starter · #18 ·
I saw this article as well. Chicago business coverage on this has been stressful to read. Sometimes I feel Crains coverage on stories in general is sensational and/or negative.
 

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Discussion Starter · #19 ·
I agree completely and it bothers me that we are competing with Atl. Not that it isn't significant but still much smaller than Chicago. I can understand competing with NY and losing because they are the financial capital of the United States/World but I feel we are losing rank in a big way if the ICE deal goes down. Essentially they will move in front of us as a financial center. Hopefully people will understand that we will sell part of our soul if this goes down. That is why ICE is fighting so hard for this. It would be disturbing if a seven year old company takes control of one of the oldest exchanges in the United States.
 

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I agree completely and it bothers me that we are competing with Atl. Not that it isn't significant but still much smaller than Chicago. I can understand competing with NY and losing because they are the financial capital of the United States/World but I feel we are losing rank in a big way if the ICE deal goes down. Essentially they will move in front of us as a financial center. Hopefully people will understand that we will sell part of our soul if this goes down.


That is why ICE is fighting so hard for this.

It would be disturbing if a seven year old company takes control of one of the oldest exchanges in the United States.
Give this man a beer!:)

He knows what he is talking about.


Screw 500k.

It would still be greed in my book if this one turns, regardless how people live with themselves in this day and age...
 
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