A Conversation with President Phupinder Gill and COO Bryan Durkin
CME Group COO Bryan Durkin (left) and CME Group President
Phupinder Gill (right)
Following the close of the merger on July 12, 2007, CME Group President Phupinder Gill, along with CME Group Chief Operating Officer Bryan Durkin, sat down with CME Group Magazine to discuss the vital task of integration. Gill has held several leadership positions during his tenure with CME, including president of CME Clearing from 1998 to 2003 and president and COO from 2004 through the close of the merger. Serving as executive vice president and COO at CBOT, Durkin was responsible for maintaining the organization's clearing relationship with CME, as well as its trading operations. Now that integration is well underway, Gill and Durkin discuss their plans for a smooth transition and what to expect in the months ahead.
CME Group Magazine: Now that the merger is complete, how will CME Group work with customers of both exchanges?
Phupinder Gill CME and CBOT have been preparing for this transition since October 2006 and we are ready to make this as seamless as possible for our customers. Our products and services staff, as well as those in the Globex Control Center – GCC – technology division and trading floor will be working directly with customers to make sure they have the information they need. We have hosted several customer forums that started in Chicago at the end of July and will conclude in Singapore at the beginning of October. These forums enable customers and their members to hear first-hand information about the progress and latest developments surrounding the transition of CBOT products onto CME Globex.
Bryan Durkin In the meantime, we have also created several customer resources that are available on www.cmegroup.com. These include a customer fact sheet that highlights some of the key changes, along with more detailed resources such as a client system impact document that includes more specifics around timing and how the various systems will be merged. As new information becomes available, we will contact our customers and post updates to the CME Group Web site in real time.
Additionally, early into the planning process we established several industry council groups which are comprised of representatives from our trading community. The purpose of these industry groups is to maintain continuous and open communications regarding the integration process, the plans for moving all products onto the Globex platform, and the planning process for combining the trading floors.
What are the advantages of a single electronic platform and trading floor?
PG As a result of the merger, customers will have access to a wide array of benchmark exchange-traded derivatives based on the entire U.S. interest rate yield curve, equity indexes, foreign exchange, agricultural and industrial commodities, energy and alternative investment products, such as weather and real estate. Essentially, we will deliver the core risk management tools that our customers around the world are looking for – when, where and how they want them.
BD In addition, for customers who use both CME and CBOT products, a single platform means annual cost savings of approximately $125 million. Most of these savings come from technology – moving CBOT's products to CME Globex will make it more cost efficient for firms to access CME Group through one connection.
When can customers expect all products to be available on CME Globex and when will the merged trading floor go into effect?
BD Platform consolidation will be conducted in phases. We plan to start the first phase of moving CBOT products onto CME Globex in first-quarter 2008. CME and CBOT open outcry markets will be consolidated onto a single trading floor at the CBOT location starting secondquarter 2008. Our goal is to deliver significant efficiencies along with new products and technologies as quickly as possible to our customers on a global basis, so that they are able to realize the benefits of our combined company sooner.
How will you work with the front-end Independent Software Vendors (ISV s) to integrate these products onto CME Globex?
BD The high degree of commonality between the ISVs at CME and CBOT will likely make integration efforts easier as most understand the complexities of both exchanges, their respective products and CME's interfaces. That being said, CME Group is taking a number of proactive steps to work not only with the ISV community, but with all front-end system providers that connect to CME Globex. The first client system impact document, which details the primary changes, was published on April 20.
PG In addition to publishing an updated version of the client system impact document post-close, CME Group has been holding customer forums to review the impacts with system developers and customers in Chicago, New York, London and Singapore. To further ensure integration, we will conduct in-depth, one-on-one sessions with key ISVs and system developers to review and discuss the changes required well in advance of the January 2008 launch.
How will orders be routed to and from the trading floor from CME Globex?
BD Today, orders at CME are routed to the trading floor from CME Globex through an iTOPS (internet trade order processing system) interface that is supported by a number of frontend trading applications. Firms that use TOPS to route orders to CUBS (CME universal brokerage system) on the CME floor will transition to the CBOT's Order Direct API. CUBS users on the CME floor will be transitioned to the CBOT's broker device called “electronic clerk” which provides richer functionality. HHT (local handheld terminals) and Denali will continue in their present form.
How will CBOT 's operations be integrated?
PG CBOT market operations will retain the existing support and contact information until the migration of CBOT products to CME Globex is complete. Only authorized contacts registered by a clearing firm can contact the GCC. Existing e-CBOT responsible persons or their backups will not be able to contact the GCC unless registered by a clearing firm.
CME has been making a significant investment to migrate options electronically. Will CBOT options be integrated into the CME Group strategy?
BD In addition to integrating CBOT options into the CME Group options strategy, we will be making changes to the system in order to support CBOT products. These system changes include fractional price support, cabinet prices, group/product code changes, market depth, first-in-first-out algorithm (FIFO) with lead market maker (LMM), market maker order types and eSTOP.
As a result of the merger, can CME members trade CBOT products and vice versa?
BD No. The formation of CME Group will not result in any change to trading privileges for CME or CBOT members. Therefore, CME and CBOT members will continue to be able to trade on the same terms as before the transaction.
For customers with operations outside of the United States, how will the merger affect them and who is their primary communication contact at CME Group?
BD This merger presents unparalleled trading opportunities for customers to manage risk across every major asset class. In order to assist customers, we have a number of people in local offices around the world – London, Hong Kong, Sydney, Tokyo – who are ready to help. For specific contact information, visit the “Contact Us” section of the CME Group Web site.
What can customers do to help CME Group during this transition period?
PG One of the guiding principles of CME Group is customer service. We see that as a key differentiator for our company and we encourage customer feedback on our products and services. Our business is all about relationships and we value what our customers and partners tell us.
BD One great way for us to hear from our customers will be at our customer forums. These forums provide a great opportunity for feedback so we encourage people to attend these sessions. In addition, customers are encouraged to review the new CME Group Web site (www.cmegroup.com) where they will find a number of resources that will help them make the transition and find the right contacts. And by all means, we hope customers e-mail and call us with ideas and thoughts.
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