David Brennan Letter Outlines Start of Process for CBOT Restructuring Plan, July 21, 1999

Dear Fellow Member: The CBOT of Directors, at my urging, voted yesterday to begin the process of preparing an exchange-restructuring plan, in order to allow us to better realize the value of the CBOT to the members. The measure passed by the Board stated: 1) Adoption of a for-profit structure by the CBOT; 2) Demutualization, i.e., the separation of ownership (equity) and trading rights of each membership; 3) Monetization of ownership component through private or public investment; 4) Preservation of existing trading rights (including the Full Member's CBOE exercise right). Let me assure you at the outset that the plan we develop would eventually have to be approved by the Board of Directors and of course approved by the membership. I want to keep you apprised of important developments in the process so that any eventual decisions by the membership are based on the facts. There is still a tremendous amount of research and discussion necessary before a specific for-profit restructuring plan is brought to the membership for your consideration. However, the unprecedented competitive environment we face dictates beyond doubt that we need to consider alternative structures. We need the resources and flexibility to assure that our customers continue to prefer using CBOT markets rather than our competitor's systems. Frankly speaking, our current governance structure does not allow us to enact decisions and mobilize financial resources with the speed required in today's electronic marketplace. It worked well for 150 years, but it is not the structure a company would use if starting a successful new exchange today. We must face the realities in the global marketplace and seriously explore the alternative. There will be a serious effort to assess the financial possibilities of any restructuring. I believe we have a responsibility to find out what sort of value could be placed on the CBOT's member's holdings. At this stage, we should determine how to realize the value of a restructured CBOT, while also maintaining all existing trading opportunities. The approach to be studied would involve unbundling the trading privilege (including the CBOE exerciser right) from equity ownership. The membership equity could then be monetized. I am committed to devoting time, energy, and resources to make sure that the CBOT, and its members, are positioned to compete and grow in the 21st century. A member Task Force (below) is charged with developing a plan for the restructuring. They will participate in all aspects of the work analyzing alternative structures and monetization opportunities. CBOT Restructuring Task Force: David P. Brennan, Chairman; Thomas E. Neal; Charles P. Carey; Joseph Niciforo; David J. Fisher; Edmund J. O'Connor; David F. Goldberg; James J. O'Connor; Neal E. Kottke; Michael P. Ryan. I will continue to report to you first-hand the progress we are making on the restructuring and the pros and cons associated with change. In time, we will hold meetings with members to further the communication process. As always, the lines of communication remain accessible and open. Healthy dialogue will make sure that we leave no stone unturned in our search for the best answers. Sincerely, David P. Brennan