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CME announces new leadership

 
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Published by Medill Reports

By Christina Maria Paschyn
Jan. 24, 2007

Futures exchanges Chicago Mercantile Exchange Holdings Inc. and CBOT Holdings Inc. announced Wednesday that only one CBOT senior official will be carried over to the post-merger management team, leaving the CME leadership largely intact.

“The CME had a really solid management team in place that took it ahead of the CBOT,” said Patrick O’Shaughnessy, a Morningstar Inc. equity analyst. “They were more aggressive…They spurred company growth much more so than the CBOT. Out of the two management teams, the CME is the one to keep.”

Bryan Durkin, CBOT executive vice-president and chief operating officer, will supervise the transition of the CME trading floors to the CBOT trading facility and the transfer of e-cbot products to the CME Globex electronic trading platform. He will report to CME President and Chief Operating Officer Phupinder Gill once CME’s acquisition of CBOT is completed in mid-2007.

The four CBOT officials who were not offered positions in the larger company have severance packages providing them with at least a year’s salary if they lose their jobs in the merger. They are Kevin O’Hara, chief administrative officer and chief strategy officer; Christopher Malo, executive vice-president of marketing and business development; William Farrow, chief information officer; and Glen Johnson, chief financial officer.

“This is the first step in the staffing process so further decisions have not been made,” said Melissa Jarmel, CBOT corporate communications director.

The rest of the management team will consist of eight CME officials. They will serve under CME Chief Executive Craig Donohue, who will become the chief executive of the combined company.

Bernard W. Dan, CBOT chief executive, will remain in his current position for now, overseeing CBOT’s activities, products and customers. When the transaction is complete, he will serve as special advisor to the merged company for one year.

Terrence A. Duffy, the current CME executive chairman, will keep that position while CBOT Chairman Charles P. Carey will become vice-chairman of CME Group.

“There was nothing surprising in the announcement,” said Deutsche Bank AG analyst Scott Appleby, who currently rates CME as a buy. He does not expect the post-merger management plan to affect the outlook of the combined company.

CME and CBOT also said they are on track to completing the merger on time. They filed a registration statement on form S-4 with the Securities and Exchange Commission last month and are not anticipating any problems.

The CME futures exchange announced its plan to merge with the CBOT futures exchange on October 17. The combined company, to be named CME Group Inc., a CME/Chicago Board of Trade Company, is valued at $25 billion.

The CME and CBOT have no product overlap; they will form the world’s largest futures exchange, holding leading positions in various futures markets such as Eurodollars and soybeans.

The CME closed at $591.54, up 1.23 percent the previous day. The CBOT rose 1.31 percent to $175.72.

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