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.Nor was it even an issue between the two factions battlingfor election votes.Nor was Globex the basis of the conversation betweenmyself and Scott Gordon that fateful April day in 2002 when we met in myoffice and I admitted that the squishy rumor he heard about Terry Duffymight be true.Rather, at issue was the most critical element in the evolution-ary metamorphosis: How do you get to the promised land without turninginto pillars of salt? In other words, how does an open-outcry exchange gettransformed into an electronic enterprise without losing its essential asset,its continuous liquidity? How does demutualization affect the direction ofa futures exchange? What value do you place on experience and internalexpertise as you prepare for the future? But that is not how the press read it.Days before the election the headline from Dow Jones Commodities Serviceread CME s Chairmen Vote about Keeping Old Ties in the New World. Thestory explained: On the top level, it seems to be a battle between the oldorder and new order over how quickly the exchange replaces its traditionalpits with an all-electronic trading system. To his credit, Terry Duffy didhis level best to keep the focus on the real issue of the election.He toldthe Dow Jones reporter, We need a chairman who is independent. 3 Onthe other hand, David Greising, of the Chicago Tribune, preferred to bephilosophical:In their day, Melamed and his feisty protege (Sandner) helped make theMerc one of the world s most influential and innovative exchanges.Toobad old times aren t what the Merc needs right now.The exchange ispreparing to offer stock to public investors.It fights to adapt to electronictrading.It is a leader in Chicago s effort to control the new market forfutures contracts on individual stocks.And in all these areas, the Mercis faring well.Under Chairman Scott Gordon and new Chief Executive P1: OTA/XYZ P2: ABCc09 JWBT139-Melamed June 25, 2009 13:9 Printer Name: Courier Westford90 Battling the Tyranny of the Status QuoJim McNulty, the Merc has avoided the pratfalls that the Chicago Boardof Trade has endured.It has a chance to convert electronic trading froma threat to an ally for growth.And yet, with all this on the line, whatis the talk as the Chicago Mercantile Exchange heads into a vital annualmeeting Wednesday? They re talking about Jack and Leo.The wonder ifthe two fading legends really will make their move, first to oust Gordonand later McNulty.4Thus, this was a political chess game with the highest of stakes thefutures market s version of Barbarians at the Gate. If we lost, we wouldnot only lose our standing and reputation, we would lose our only chanceto save the CME from what we believed to be a terrible destiny.The threeof us, Terry, Craig, and I, became a team, relying on each other s skillsand operating as a synchronized unit.It required all our talent, credibility,and intellectual capital.It required a comprehensively designed blueprint,meticulous execution, complete coordination, and an ability to be in con-stant contact.We met several times every day, most of the time in secrecyin my office.We kept each other totally informed.What made matters mostdifficult was that everything we planned had to be done under the wrapof secrecy.Our goal was to gain a majority of the 20 votes on the board.Some of those votes we knew were impossible to wrest away from Gordon,who was a likable person with deep roots at the Exchange and perceivedfavorably by the media.Outwardly, he had done a credible job as chair-man.His alignment with Jim McNulty, who had a very good image with thepress, also served him well.On the other hand, Terry Duffy was a virtualunknown quantity to the media or the public directors on the board, whosevotes were critical.Being vice chairman of the Exchange did not generatea great deal of public recognition.Nevertheless, I was convinced that Terrywas a quick study and had all the attributes of leadership.Flashing forward,there can be no doubt that this proved totally on the mark.Sure, Terry hadthe guidance and assistance of some savvy and experienced people aroundhim, but clearly he possessed the necessary talents.Seldom have we everwitnessed as quick and as successful an on-the-job training as occurred withTerry Duffy.Besides, our effort was not based on any one individual s capability buton the totality of our mission on behalf of the Exchange.We were repre-senting a time-proven record based on innovation and success.We werespeaking with credibility, experience and expertise.Our views had alreadyfound resonance with many of the board.I inherited the responsibility toorchestrate the lobbying effort to reassure those board members, especiallythe public appointees, of the validity of our cause, the direction we plannedfor the Exchange, and our choice for the next chairman.I began the processwith my good friend Myron Scholes.Over the years, we had developed a P1: OTA/XYZ P2: ABCc09 JWBT139-Melamed June 25, 2009 13:9 Printer Name: Courier WestfordCabal 91strong respect for one another.Myron and I had often met for dinner dur-ing his trips to Chicago and always our conversation was directed to theCME, its plans and future.As a Nobel Prize recipient, Myron was highlyregarded on the board, and his views would be extremely helpful in theundertaking at hand.If I won him over, we judged, it would go a long wayto sway others around the table.If not, the odds against us would becomelarger.In truth, even before the campaign began, Myron had confided inme that in his opinion the CME was moving in the wrong direction underthe Gordon-McNulty leadership.Since our views were in sync, the dinnermeeting we had at the Ritz Carlton was much easier than I had anticipated.Although Myron did not know Terry Duffy, he was willing to rely on myrecommendation.His agreement provided me with a strong foundation tomove forward.Carefully choosing the board members whom we believedwe could persuade, over the next several weeks, I held one-on-one as wellas group meetings with every one of the 15 board members who ultimatelyvoted with us.In similar fashion, Terry Duffy, using his natural politicalskills, held similar one-on-one meetings with each of the board memberswhom he had known over the years.Terry and I met daily to compareour results.Our combined victorious efforts served to cement our lastingfriendship.Mercifully, because Craig Donohue was not an elected official,we spared him from this exercise.But his guidance and the continuousflow of information he provided about the maneuvers by our oppositionwas crucial.In the case of Jack Sandner, it was different.Jack met with Terry, whotold him to talk to me.Jack had a sense of what was going on and wantedto help execute the plan.It was no surprise
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