INTERVIEW WITH REUTERS:
Chicago trading icon Melamed has "dream come true"
By Christine Stebbins
July 12, 2007
(c) 2007 Reuters Limited

CHICAGO, July 12 (Reuters) - The deal of the century for Chicago was cemented on Thursday as the city's two long-time and sometime bitter rival futures exchanges merged to create the world's largest derivatives market, the CME Group Inc.

"This is a dream come true," Leo Melamed, a driving force behind the merger and the city's booming financial markets, told Reuters in an interview on Thursday afternoon.

Shares in the 159-year old Chicago Board of Trade were officially delisted at the close of the day's trade on stock markets, with the 88-year-old Chicago Mercantile Exchange completing its $12 billion dollar merger.

"This is something I felt throughout the past two or three decades was the right thing for both exchanges. We were no longer competitors, we were partners," said Melamed, the CME's chairman emeritus, now in his mid-70s and still a strong industry voice.

Melamed brought financial futures trading to the CME in 1972 and innovated aggressively, serving as chairman at the CME. He was instrumental in launching currency futures and Globex, the exchange's electronic platform.

The two Chicago exchanges were rivals for decades. CBOT traded grains and T-bonds. CME traded livestock and Eurodollars. The rivalry was symbolized by the annual CBOT-CME boxing matches, a charity event that pulled no punches.

It wasn't until the 1980s that two started to see more eye-to-eye, Melamed said, as rising electronic trading cut broker revenues and squeezed back-office bookkeeping and trade flow costs.

"The new century happened to clarify the differences between the two exchanges," he said.

First came an acceptance by the CBOT that electronic trading was the wave of the future. For the last four years, the two joined their important electronic trade clearing functions, savings millions and convincing many that the two had more business interests in common than differences.

Then, in the last few years both long-time, member-owned, clubby exchanges went public by issuing shares.

"In doing that we solved another riddle -- valuation," Melamed said.

But the CME's courtship of CBOT that began in October 2006 lasted longer than anyone initially expected, since by then the two giants appeared to be on quick merger track.

In March, out of the blue, an unsolicited bid by an Atlanta-based energy bourse, the IntercontinentalExchange, opened a bidding war with the Merc that finally ended last Friday when CME sweetened its bid a third time and agreed to pay $12 billion -- about 25 percent more than its original bid.

"The CBOT has a very long and proud tradition and the Merc has always admired that tradition," said Leo Melamed.

"While there's a certain amount of nostalgia," he said the two exchanges have been acting like partners for the last few years and they will "be so much stronger together."

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