In remarks prepared for delivery, Neubauer said, "We had our second highest volume year ever and membership values are up significantly. We had an excellent year financially as an exchange, ending with an unrestricted cash balance of just over $50 million."
Neubauer noted, "We worked to develop excellent relationships with the other Chicago exchanges, including reaching an agreement with the Chicago Board Option Exchange that worked out differences over our exercise right agreement. We continue to make our open auction markets more technically efficient and we anticipate that we will make about $24 million in technology investments in 2002"
Talking about the need to create successful products, Neubauer said, "We introduced four new products in the last six months @ swaps, e-mini Dow, X-Funds, and the DowSMJones/AIG Commodity Index. This year we have to show that we can continue to create successful products that increase opportunity for our members. I want to see swaps grow so that it becomes a substantial open auction pit. I would like to see the e-mini DowSMreach volumes like that of the e-mini S&P or e-mini Nasdaq. X-Funds have great potential and I want to see it reached."
He added, "The Chicago Board of Trade has responded to customer demand by offering electronic order routing to our open auction pits. It is a top priority of our technology strategy and we have made steady progress. In the CBOT®'s open auction markets during 2001, just over 5 million customer orders were electronically sent directly to brokers in the pit. Nearly 1.7 million of those orders were filled. This represents a 38% increase in electronic tickets sent and a 44% increase in electronic tickets filled than during 2000. At the end of the year, the exchange had more than 40 member firms utilizing its electronic order routing system, a 54% increase from the number of firms using the system in January 2001.
"We intend to continue to develop electronic access to the floor, which creates the opportunity for our agricultural and financial sectors to further integrate technology with open auction trading while at the same time continuing to leverage our liquidity. This year is critical for us to make successful investments that make open auction as technically efficient as we can. We want to provide the same quick fills as the electronic platform. By offering 'point and click' functionality in both platforms, we can offer the customer a true choice as to how they want their orders filled."
Commenting on the Enron debacle, Neubauer said, "Our watchwords are "Integrity, Liquidity, Flexibility." Pre-execution communications are strictly limited so that they do not become "pre-arranged trades' that disadvantage the market. We stand for immediate reporting of all trades so that all market participants are treated fairly and we are opposed to block trading rules that allow delayed reporting of possibly off-market trades.
"My point is that it seems to me that the two platforms together offer customers a choice and ensure the market transparency and fairness that is the hallmark of exchanges like the CBOT®. Consider Enron and this issue of transparency. Not long ago, its trading system was the largest of its kind in the world, accounting for one quarter of the natural gas and energy delivered in the United States.
"Rather than having operations that were open and transparent, its operations were so opaque that news accounts tell us that in 1998 they could construct a phony trading room in order to fool visiting stock analysts as to the nature of its operations. That's right: according to press reports they set up a phony trading room, filled it with secretaries and other staff who pretended to be making energy deals over the phone, and led over 100 visiting analysts through it. It also was reported that Jeff Skilling, the then-CEO, even joked that it was a scene seemingly out of the movie "The Sting".
"We are proud to show the world our exchange operations and it is a regular stop for those members of Congress who visit the CBOT®. Our financial surveillance programs continuously monitor the financial condition of member firms and their ability to comply with their obligations to customers. These programs, plus many others, all contribute to the CBOT®'s international reputation as an institution that protects its markets from manipulation and its market participants from abusive practices.
"Contrast what we have with the numerous dot.coms or electronic platforms that were supposed to take our business away, none of which have tested surveillance programs like ours, the price transparency and daily mark-to-market found in our markets, or a triple AAA credit rating backing of all their trades. We have an obligation to our customers and the public generally to tell our story, and we have been doing so. Congress will be considering issues raised by the Enron debacle and we will work to see that the best public policies are adopted."
For a copy of Chairman Neubauer's remarks, or for more information on the CBOT®'s products and markets, log onto the exchange web site at www.cbot.com.
