The Chicago Board of Trade took another step toward becoming a publicly traded company Wednesday when its board of directors unanimously approved settling a lawsuit over how to divide ownership of the exchange.
The 17-member board agreed to a plan that would give the 2,200 minority members a 22.35 percent share in the Board of Trade’s equity. The rest would be divided among the 1,400 full members. The agreement must still be approved by a Cook County Circuit Court judge.
“We are pleased to have reached an agreement that is intended to serve the interests of all CBOT members and permit the exchange to move forward in its efforts to restructure,” said exchange Chairman Charles Carey.
The minority members sued in July 2000 when they were offered only 12 percent of the Board of Trade’s equity if plans moved forward to make the board a publicly traded company.
The Board of Trade’s full membership would have to agree to such a plan, but it has been cited as a priority by Carey and Bernard Dan, president and chief executive officer. Being a publicly traded company would make the Board of Trade more competitive, they have argued.
At least one trader, a full member, said he thinks the dispute should have never happened.
“I think it was a big waste of time,” said Alan Palmer. “It was a great subsidy for the lawyer community.”
Others were relieved that the issue was settled.
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“This seems like a fairly reasonable way out of the box that we were in,” said one full member, who asked not to be identified.
The minority members did not bring their lawsuit to derail the Board of Trade’s push toward going public, said their attorney, Barry Rosen of the Chicago firm Sachnoff & Weaver.
“From our initial complaint and throughout, the minority members made it clear they support the board,” he said. “They just wanted to ensure they got a fair shake.”
The agreement “represents a fair compromise of our differences, but more importantly it is a signal for all members to unite and support our exchange in the battles that lie ahead,” Timothy Feldheim, one of the minority members, said in a statement.
The Chicago Mercantile Exchange became a publicly traded company in December 2002. Others have said they want to follow suit. On Wednesday, the Philadelphia Stock Exchange announced that its plan to go public has received approval from the Securities and Exchange Commission.
In Chicago, the effort to become a publicly traded company has picked up urgency as the Board of Trade prepares to face new competition from Eurex, the European-based futures exchange that is the world’s largest.
Eurex US is prepared to begin operations in the coming weeks, with plans to immediately begin offering U.S. Treasury futures. Trading in U.S. debt has long been dominated by the CBOT.