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.In other words, the real battle over electronicmigration of Eurodollars was yet to be fought.Still, it was progress.The gen-eral commitment toward electronics as well as demutualization was clear.We even agreed to retain an investment banker, and the SPC eventuallyhired Salomon Smith Barney in an advisory capacity.Three months later, in November of 1998, the Strategic Planning Com-mittee made its final report to the board.Jimmy Oliff took the lead.As Irecall, it took us more than an hour to read into the record the gist of our longdeliberative process and to present our recommendations in detail.We hadcondensed our recommendations into four salient points.The first two wererelatively noncontroversial: it was to have the SPC begin working on the nec-essary steps to lead us to demutualization by becoming a for-profit corpora-tion (talk about your unintended consequences of the technological revolu-tion), and for the board to agree that we strengthen our competitive positionby reaching out to possible partners to develop strategic alliances.The finaltwo recommendations were explosive, contentious, and demanded immedi-ate action.They represented the SPC s decision to bite the bullet.We askedfor a two-pronged effort toward advancing Globex as a world platform.First, to invest the large sums needed (about $65 million over the 14 monthsthrough January 2000 serious money at the time) to build up the capacityof Globex so it could handle the entire breadth of 40 contract months ofthe Eurodollar.Jim Krause had advised me that the first phase of Eurodollarcapability would be ready no later than June 30, 1999, and the entire rangeof Eurodollar futures and options contracts would be able to trade side-by-side by January of 2000 (an ambitious but doable schedule and hopefullyin time).Second, we proposed that the CME hold a membership referendumto approve side-by-side (concurrent) trading of the Eurodollar contract withGlobex.The board knew this was coming and prepared to do battle.When the arguing was over and the smoke cleared, the board of direc-tors of the CME voted approval of all recommendations of the Strategic Plan-ning Committee with only four dissenting votes.It was a historic achieve-ment.Without doubt what turned a number of votes was the convincingargument made by both Jimmy and myself that an assault on our Eurodollarfranchise contract was imminent.We argued that it would be the height ofmisfeasance if we remained unprepared.This view was emphatically sup-ported by the members of the SPC as well as Scott Gordon.It was alsovery helpful that in August, several months earlier, the CBOT membershiphad approved by a five-to-one margin side-by-side trading for its TreasuriesP1: OTA/XYZ P2: ABCc06 JWBT139-Melamed June 25, 2009 13:6 Printer Name: Courier WestfordGlobal Competition 57futures contracts.Of course, Treasury futures at the CBOT did not holduntouchable status as did their agricultural complex of corn, soybeans, andwheat, nor as Eurodollars did at the CME.Still, CBOT chairman Pat Arborhailed it as preemptive action: We must be competitive and visionary toremain the industry leader.To preserve these markets, particularly open out-cry, we are making a preemptive strike on any entity which might emerge6as our competitor. I recall calling Pat to offer my congratulations.There was one ancillary recommendation by the SPC of critical im-port: to proceed with development and deployment of a new handheldtechnology, the so-called Galax-C.It would enable local traders to con-duct interactive Globex trading from anywhere on the floor.Jim Krause tothis day believes that Galax-C represented the biggest boost for advancingGlobex.Because the currency complex had already approved side-by-sidetrading, the handheld instrument could be deployed to that quadrant byMarch of 1999.7 However, for the big-enchilada, Eurodollars, it would haveto wait for referendum approval.The board agreed to advise the membership of the SPC proposal in itsentirety at special members meetings scheduled for the end of November1998.It was also to be the main topic of discussion at the forthcomingAnnual Members meeting in December.At that meeting, I was heartenedby the fact that the proposition seemed to receive a favorable reaction.Again, I believe the fear of a competitive assault on our markets was a mostconvincing factor as was the favorable vote by CBOT for their Treasuriesmarkets.Referendum on the proposition was scheduled for January 14,1999.As expected, it was the only topic of discussion by the floor communityduring the two months leading up to the vote.A group of us, includingJimmy Oliff, Bill Shepard, Scott Gordon, Jack Sandner, and myself, spentcountless hours on the floor with groups of members or one-by-one.Welobbied as if it were a holy mission.I insisted that our sole common hymnbe that this was an imperative defensive action against competitive threats.The referendum passed overwhelmingly with 92.8 percent of the weightedvotes cast in favor of the proposal.The gigantic Eurodollar contract alongwith all other futures had gone side-by-side with Globex.One of my closest friends, Dr.Henry Jarecki, an original board memberof the IMM and an astute observer of the market scene, jubilantly called tosay he never believed he would see this day.The event was historic, butsadly, pyrrhic.Like the guy said, we called for a celebration but nobodycame.With few exceptions, the Eurodollar community traders, indepen-dent brokers, members of broker groups continued to trade in the pit asif nothing happened; similarly, the traders in the agricultural sector.Asidefrom the S&P E-Mini and foreign exchange trading, Globex generated vir-tually no additional business.Since liquidity begets liquidity, the dealersand hedgers could not budge from the open outcry arena so long as theP1: OTA/XYZ P2: ABCc06 JWBT139-Melamed June 25, 2009 13:6 Printer Name: Courier Westford58 Battling the Tyranny of the Status Quolocals business flows on which they depended remained rooted in the pit.In 1999, the Eurodollar complex of futures and options represented nearly59 percent of the Merc s total financial volume and a whopping 76 percentof its total open interest.Without Eurodollars, the evolution to electronictrade was stalled.In Jim Krause s words, The side-by-side approval wasimportant from a political standpoint, but from a technology standpoint itwas a dud.We just spent a lot of money for nothing.I disagreed.We were battling a century-old tradition.The tyranny of thestatus quo was not so easily reversed.I was certain that between the launchof the E-Mini and the current side-by-side referendum, the foundation forthe electrification of the Merc had been laid. Jim, I said, Patience.It tooktwo centuries to make the Renaissance
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