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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 Commodity Futures Trading Commission 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 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.
