Release: #4407-00
For Release: June 16, 2000

Commission Approves Demutualization Proposal

Washington -- On June 15, 2000, the Commodity Futures Trading Commission approved Chicago Mercantile Exchange ("CME") rules and procedures implementing the CME's proposal to convert from an Illinois not-for-profit membership corporation to a Delaware for-profit stock corporation. The CME's proposal had been approved by its members on June 6, 2000. Concurrent with its approval letter, the Commission issued an order transferring all of CME’s current contract market designations to a new entity, the Chicago Mercantile Exchange Inc.

Although there are for-profit futures exchanges, the CME’s proposal is the first demutualization plan of an existing exchange that the Commission has approved. In reviewing the proposal, the Commission analyzed the potential impact of the plan on current CME activities and, in particular, focused upon the ability of the new for-profit exchange to continue to perform its self-regulatory responsibilities effectively.

The Commission’s approval and its issuance of the order transferring contract market designations are based upon fulfillment of certain specified conditions as well as certain representations of CME and Chicago Mercantile Exchange Inc. The conditions, which are intended to assure that the new for-profit entity will satisfy the Commodity Exchange Act and the Commission's regulations, are:

  1. the existence of Chicago Mercantile Exchange Inc. as a corporation duly authorized and validly organized under the General Corporation Law of Delaware;
  2. the consummation of the merger of CME into Chicago Mercantile Exchange Inc. and associated recapitalization, simultaneous with the foregoing transfers;
  3. the adoption of the CME Rulebook, as amended, by Chicago Mercantile Exchange Inc.; and
  4. the continuing compliance of Chicago Mercantile Exchange Inc. with all applicable provisions of the Act and the Commission’s regulations thereunder.

Before the plan can be implemented, the Internal Revenue Service must take certain action requested by the CME.

For more information on futures exchange demutualization, see the Division of Trading and Markets' memorandum recommending approval of CME’s demutualization plan and transfer of all contract market designations from CME to Chicago Mercantile Exchange Inc at http://www.cftc.gov/tm/tmcme_demutualization_memo.htm