Chicago Mercantile Exchange ousts Chairman Gordon (new story updating earnings with details of CME election) By Meredith Grossman Dubner CHICAGO, April 24 (Reuters) - The board of Chicago Mercantile Exchange Holdings Inc. ousted Chairman Scott Gordon on Wednesday and replaced him with an independent floor trader after heated debate about the role of electronic trading in the future of the world's No. 2 futures exchange, a source close to the exchange said. Gordon was replaced by Terrence Duffy, an independent floor trader of hog futures, who called on the exchange to dedicate more money to train floor traders in electronic trading to ensure key liquidity providers would know how to make markets on the screens. Sources said the crux of the debate centered on the pace at which the exchange embraces electronic trading. Electronic trade now accounts for about 20 percent of CME volume but less than 4 percent of its flagship Eurodollar contract. Some Gordon critics had feared a rush to electronic trade could drive out of business members who have spent their entire careers in the trading pits. ``Our membership has been educated to the idea that our destiny is electronic (and) has come to terms with that. That really is no longer the issue,'' a source close to the exchange said. ``The only issue before us is how to evolve -- what is the best way to bring the membership into the new era. And it's a question of doing it correctly, because they represent an enormous resource.'' CME has laid the groundwork for an initial public offering of stock as part of a tough transition from an exchange dominated by its members to one open to outside investment and run as a public company. Earlier on Wednesday, CME said net profit in the first quarter of 2002 fell 15 percent -- to $17.1 million from a record $20 million a year ago -- because of rising expenses linked in part to millions of dollars of potential stock-based payments to its executives. The exchange said profits fell even though it posted record volume of 120.5 million contracts traded in the first quarter and a 10 percent rise in revenues to $101.1 million. CME is the world's second largest futures exchange behind the Swiss-German all-electronic Eurex.
If Eurex or LIFFE listed a Eurodollar contract, the Merc wouldn't have a choice but to trade the ED during the day session on Globex. They are taking their sweet time, but they are looking over their shoulders at the burgeoning E-mini volume, and they certainly can see that A/C/E volume has been running about 60% of the volume since the Dec. contract rollover. It's gonna happen!
Bone: I don't disagree, but the dynamics of the ED contract are a little different then other financial futures. Index's and Treasuries have 95% of their volume in the front month. Even during roll only ONE spread comes into play, i.e. Mch-Jun. In Euros back months go out TEN years. And a lot of those backs trade too. Until the screen can quickly, and easily handle not just 1-1 spreads, but butterflies and ratios, the pit will survive. Same thing in options. The ability to spread and not give up TWO edges is key.