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LETTER FROM EAGLE TO CME GROUP
Ron Manaster, Chairman of Eagle Market Makers wrote the following letter. It was delivered by electronic mail to the chairman, Chief Executive Officer, Chief Operating Officer and all Members of the Board of Directors of CME Group Holdings, at approximately 5:00pm Monday, May 21, 2012. He has asked me to share it with you.
Eagle Market Makers
Last Friday, May 18th,in an unprecedented display of naivete and insensitivity to liquidity providers, exchange members and shareholders; Bryan Durkin and his Management Team with as little as two hour notice, changed an eighty some year history of 9:30 am grain opening and 1:15 pm close* and extended the trading day to twenty-two hours. Our product is liquidity, deep liquidity. The decision shows a lack of sensitivity to the needs of its largest customers and little or no understanding of our product which is liquidity. There is an amateurish quality to this Management Team that is just wrong. None of the Management Team has market maker experience. This decision was made in a vacuum, under a cloud of abject panic. Panic about a competitor ICE – an exchange attempting to take a share of our grain market. I cannot see who was in favor of this. I would like to know.ICE has a product designed for over the counter trades (OTC) and block trading. It is a cash settlement contract. There is no history of a cash settled agricultural contract succeeding in more than one delivery month at a time. Cash settlement contracts are predominantly traded in the nearest delivery month – except for the "roll over" which is around 15-20 trading days a year. In contrast, our grain markets are spread markets with up to six active delivery months. ICE now has our product – DEEP LIQUID MARKETS to "lay off" THEIR PRODUCT by "picking off" OUR market makers. (Congratulations!) ICE will then have become, with our assistance a real competitor. The Management Team in their panicked reaction, with an assist from the CFTC, is choking, with their own hands, our market makers. I’m stupefied. My firm is the largest customer in the agricultural complex. We are in the top twenty of all users of the exchange. I know of no business that would make a decision of this import without consulting with and considering the best interests of its largest customers. The Management Team uses a definition of liquidity that is incorrect. The insistence on using this definition in spite of evidence to the contrary, illustrates that the wrong people are making the wrong decisions at precisely the wrong time. In its stead we should be considering ways to protect the market maker system and vigorously support any means necessary to preserve and increase liquidity – our product. Eagle Market Makers has suggested several solutions to this end. The rush should be in that direction. Any and all constructive proposals should be evaluated without delay, lest they be caught in the maze which is the CME bureaucracy. This decision must be rescinded. It will reduce liquidity and violate our market maker system. I ask those members of the board with market experience to explain to their colleagues the critical nature of this issue. Timing is of the essence. I welcome an opportunity to meet with whomever you feel can understand my needs as one of your largest customers and my grave concerns as a shareholder. We promote ourselves as the world leader and innovator in risk management and market making. Let us act like a leader.
Ronald T. Manaster Chairman of the Board
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