- Immediately following the 2004 Annual Meeting of Shareholders, CME will create a new Board level committee called the Market Regulation Oversight Committee. This committee will be comprised solely of independent, non-industry directors. They will conduct an annual review and report to the Board of Directors concerning the following:
- The independence of CME's regulatory functions from CME's business operations;
- The independence of CME management and regulatory personnel from improper influence by industry directors, regarding regulatory matters;
- CME's compliance with its statutory self-regulatory responsibilities;
- Appropriate funding and resources to ensure effective performance of CME's self-regulatory responsibilities; and
- Appropriate compensation for exchange employees involved in regulatory activities.
- Effective immediately following the 2004 Annual Meeting of Shareholders, ensure a majority of independent, non-industry directors comprise the Audit, Compensation and Governance Committees.
- Ensure that the Audit, Compensation and Governance Committees are chaired by an independent, non-industry director.
- Seek to identify three additional independent non-industry directors to serve on the Board effective with to the 2004 Annual Meeting of Shareholders, increasing the total number of non-industry representatives serving on the Board to seven.
"Consistent with CME's leadership as the largest and only publicly traded U.S. exchange, we have taken the steps to form a Board level committee consisting of independent, non-industry directors in order to ensure that CME upholds the highest standards of market oversight," said CME Chairman Terry Duffy. "We will continue to evaluate CME's governance going forward."
"CME is a model for how exchanges should be organized and operated, both in terms of transparency and openness," said Jack Sandner, the exchange's former Chairman and current Special Policy Advisor and Chairman of CME's Governance Committee. "The exchange has expanded its constituency to include non-member shareholders and investors, the investment community and research analysts. During the past year our Governance Committee has closely studied public company and exchange governance models. We have put in place audit, compensation and governance committees modeled after the best practices of some of the largest publicly traded companies.
In October 2002, CME adopted a series of measures designed to enhance its corporate governance structure and policies. CME has reduced the size of its Board of Directors from 39 to 20, creating greater accountability and more streamlined decision-making. CME's charter requires a diversity of business interests to be represented on its Board. A Governance Committee was created and was responsible for substantial enhancements to CME's governance practices, including the adoption of corporate governance principles, adoption of committee charters for Board level committees, adoption of Board Conflict of Interest policies and related procedures, adoption of a code of ethics for Board Directors, adoption of categorical standards for independence, and for providing CME Directors with access to continuing education opportunities on corporate governance issues.
"During the November 6 House Agriculture Committee hearing, CFTC Chairman Jim Newsome said that CME and CBOT do an outstanding job in self-regulation in going far beyond what the law requires," said Craig Donohue, who will become CME's CEO on Jan. 1, 2004. "CME is proud to build upon our industry leadership in this area by being the first futures and options exchange in the U.S. to put an independent, non-industry oversight structure in place for ensuring effective self-regulation."
CME publicly discloses executive compensation and benefits for its Board of Directors and top five executives, along with its overall compensation philosophy and programs for employees. In addition, a new organizational structure and CEO succession plan was introduced to ensure a strengthened governance and leadership model with CME Holdings and its exchange subsidiary, Chicago Mercantile Exchange.
CME's Governance Committee, which developed these recommendations, also includes Daniel R. Glickman, former U.S. Secretary of Agriculture and currently Director of the Institute of Politics at Harvard University's John F. Kennedy School of Government; William P. Miller II, former Director, Trading Operations and Asset Mix Management with General Motors Investment Management Corp and currently Senior Risk Manager at Abu Dhabi Investment Authority; Terrence A. Duffy, CME's non-executive Chairman; Leo Melamed, CME's Chairman Emeritus and Senior Policy Advisor; and CME Directors Martin J. Gepsman and Gary Katler.
Chicago Mercantile Exchange Holdings Inc. became the first publicly traded U.S. financial exchange on Dec. 6, 2002. The company was added to the Russell 1000® Index on July 1, 2003. It is the parent company of Chicago Mercantile Exchange Inc. (www.cme.com), the largest futures exchange in the United States. As an international marketplace, CME brings together buyers and sellers on its trading floors and its GLOBEX electronic trading platform. CME offers futures contracts and options on futures contracts primarily in four areas: interest rates, stock indexes, foreign exchange and commodities. The exchange moved about $1.5 billion per day in settlement payments in the first nine months of 2003 and managed $29.6 billion in collateral deposits at Sept. 30, 2003.
