The decision follows a resolution by the Board to present for membership ratification a proposal, which would transform the 113-year-old institution into a for-profit corporation.
Subject to member approval, the restructuring would see the current WCE become a federal for-profit share corporation with all equity owned by WCE Holdco, a for-profit corporation.
WCE Chairman, Peter G. Lloyd said, "The WCE has reached the most significant turning point in its 113-year history. The industry is undergoing profound changes and demutualization is a necessary step for WCE moving forward. The Board has endorsed this proposal for demutualization, which is a culmination of months of strategic analysis and planning."
WCE President and CEO, Bennett J. Corn said, "This new environment is demanding that exchanges have a dynamic and integrated business ownership and management structure that will allow them to be highly responsive to customers. WCE will need to position itself to have a significant role in the global and evolving technologically advanced marketplace."
The Board recommends a process of demutualization, which would streamline its governance and allow for a membership-based share entitlement allocation model. This model provides equal equity in return for each membership seat held, representing pure equity in the Exchange. Trading rights in WCE products will be based on a contractual relationship between the participant and the Exchange.
An information memorandum and ballot materials will be sent out to all members on November 1, 2000. Votes must be cast no later than 3:00 p.m. November 29, 2000. An affirmative vote of 66 2/3% of the ballots returned is required for ratification.
If approved, WCE will be the third exchange in Canada to undertake a reorganization plan of this type, following both the Toronto Stock Exchange and Montreal Exchange. It would also follow the route taken by many other major international exchanges, that includes ParisBourse, EUREX, LIFFE, CME, CBOT, NYMEX, and Sydney Futures Exchange.
Industry trends are dictating the necessity for this reorganization. These trends include the increased use of technology, the proliferation of strategic alliances and mergers, consolidation and centralization, the advent of new participants, and customer demand for direct access, increased services and transparency.
For approximately 18 months leading up to the mandating of the Demutualization Committee in May, 2000, management had been keeping the Board informed of the status of the industry in general. An in-depth discussion also took place during a Board planning meeting in December 1999.
The WCE Demutualization Committee, consisting of senior executives of the major stakeholders of the WCE, met 6 times with a mandate to explore demutualization in detail and provide a recommendation as to whether restructuring would be beneficial to the Exchange.
"Although the present not-for-profit structure has served the membership and its customers well in the past… the Committee believes that demutualization will provide WCE with the best platform to address the issues and opportunities that have emerged, including electronic trading, mergers, joint ventures, globalization and the integration of markets," stated Curt R. Vossen, Chairman of the WCE
Demutualization Committee and President of James Richardson International, in his report to the Board. This for-profit model has the benefits of streamlined governance and managerial structure, improved financial decision-making, flexibility to pursue new business opportunities such as technology sharing and equity participation, utilizing a profit making currency that is recognizable by all businesses, and attracting and retaining professional management.
WCE demutualization is contingent upon regulatory approvals and legislative amendments, which are anticipated to be completed within a 4-to-6 month period.
WCE trades futures contracts in: canola, western barley, flaxseed, oats, feed wheat and field peas; and options contracts in: canola, flaxseed, feed wheat and western barley. Established in 1887, Winnipeg Commodity Exchange is a not-for-profit organization providing financial instruments for price discovery and the transference of risk in an efficient and open manner.
