CBOT Issues Further Comment In Response To Eurex's Complaint

Chicago Board of Trade’s (CBOT®) President and CEO Bernard W. Dan issued the following statement today regarding the lawsuit filed by Eurex U.S. against the CBOT and Chicago Mercantile Exchange.

“We have now had the opportunity to read the complaint Eurex U.S. filed on October 14, 2003, and are even more confident that it has no merit. Rather than a legitimate antitrust claim, the suit is just one more facet of an all-out effort by Eurex to take over the U.S. futures markets and support those narrow interests that desire internalized trading and dealer-controlled pricing. With this lawsuit and its accompanying PR onslaught, Eurex seeks not only to influence the CFTC and Congress, but also unfairly to intimidate Chicago Board of Trade Clearing Members in exercising their votes next week on the proposed Board of Trade Clearing Corporation (BOTCC) restructuring.

We believe that certain key facts left out of the Eurex lawsuit should be noted:

1. Eurex is the largest futures exchange in the world, having utilized aggressive tactics to take over previously thriving markets in London and elsewhere;
2. For the past few years, CBOT has contracted with Eurex for electronic trading software;
3. Shortly after CBOT decided to use a superior electronic trading platform, the LIFFE CONNECT®SM system which begins trading on November 24, 2003, Eurex announced its plan to ‘steal liquidity’ from the CBOT and other US markets;
4. Mindful of its 75-year relationship with BOTCC, CBOT sought early this year to negotiate with BOTCC a long-term contract that would have extended and secured that relationship into the future;
5. Already in discussions to ally itself with Eurex to serve the narrow interests of a few large firms, BOTCC refused the CBOT’s proposal, and the CBOT elected to align efforts with the Chicago Mercantile Exchange® to develop the CBOT/CME® Common Clearing Link (CCL);
6. The CCL drives industry-wide standardization and efficiency and serves the broader interests of the futures and options industry by recognizing the value associated with all users.

Eurex and BOTCC announced last month a series of contracts. One is an exclusive Clearing Services Contract, the complete terms of which they’ve kept secret but which will continue in effect regardless of the outcome of BOTCC’s restructuring vote. Nothing the CBOT has done is directed at that contract, so Eurex’s complaint that CBOT is acting to deprive Eurex of BOTCC clearing services is false. In fact, on October 10, 2003, BOTCC wrote to its members that even ‘if there is a ‘no’ vote … [BOTCC] intends to remain an ongoing enterprise, and [BOTCC] will satisfy all of its contractual obligations with the marketplaces it serves.’

Two other announced Eurex-BOTCC contracts are the subject of a BOTCC shareholder vote next week. BOTCC seeks shareholder approval of a restructuring that would eliminate the equal voice of all firms in BOTCC governance. BOTCC also seeks approval of an option agreement that has the practical effect of giving Eurex a first refusal right to future control of BOTCC. It is essential to keep in mind that BOTCC shareholders are also CBOT clearing member firms and that a number of those firms have expressed concern that they are unfairly being forced out of BOTCC without any financial alternative.

The fact is that CBOT has acted in response to its own members’ concerns and to ease the financial duress BOTCC and Eurex seeks to impose on those members. Not only has the CBOT responded to its members’ concerns, its proposal is completely consistent with the CFTC’s pronouncement that ‘a smooth and orderly transition’ of clearing services from BOTCC to the CME is of ‘paramount importance.’

CBOT’s announced program provides its own members with relief from the Eurex-BOTCC financial duress and allows them to vote on the BOTCC proposal on its merits. Eurex plainly fears a vote on the merits.”