5. From Private Club to Public Company
Member-owned exchanges were the standard model for many years and did a fairly good job. However, an exchange owned by members meant that members often took precedence over customers. In this chapter we explain what a membership is and how those memberships were transformed into a trading right and a bucket of common stock under a process called demutualization, and we review case studies of the CME, CBOT, CBOE, NYMEX, and NYSE. We also explain the drivers behind this important transformation.
In this chapter we explore the second of the four basic transformations of the exchanges: the conversion of member-owned exchanges into publicly traded companies. There are really two steps ...