Chicago Mercantile Exchange responds io Niederhoffer litigation.

The Chicago Mercantile Exchange is issuing the attached letter from its general counsel to its membership Monday (May 17) morning based on a lawsuit filed this afternoon (May 14) by Victor Niederhoffer. The Exchange believes this lawsuit is completely without merit and is based on incorrect information and unsupportable allegations. (Letter from Craig S. Donohue, Senior Vice President and General Counsel, CME): May 17,1999. To All Members & CME Staff: On Friday, Victor Niederhoffer and four funds managed by him brought suit claiming the Exchange and persons unknown were responsible for trading losses suffered as a result of the market crash on October 27, 1997. Mr. Niederhoffer asserts that the settlement prices for certain index options were incorrectly established and that the Exchange is liable for damages in excess of $100,000,000. Another trading company, Manchester Trading, LLC, controlled by Mr. Niederhoffer, claims to have been injured in the amount of $5,000,000 by an option settlement price on August 13, 1998. Mr. Niederhoffer also purports to sue to recover losses that his default caused Refco, Inc., a clearing member of the CME. We have been aware of Mr. Niederhoffer's claims for more than a year. His claims were thoroughly investigated. Mr. Niederhoffer was given documentation demonstrating that he had based his claim on incorrect information. As recently as March 31 this year, we made a written offer to permit him to interview our staff and review our records in order to demonstrate that the Exchange was absolutely blameless. Mr. Niederhoffer rejected our offer, which, if accepted, would surely have prevented this baseless litigation. Instead, he chose to rely on the incorrect information and a raft of unsupportable allegations. This matter will be tried in the United States District Court for the Northern District of Illinois. It has been assigned to Judge Ann C. Williams. While this case is pending, we will follow our normal practice and limit our public comments and reserve our responses for the courtroom. The Exchange is confident that it will prevail in this matter.