Latin American Capital Markets

274 ROBERTA S. KARMELderivative products, a demutualized CME would be able to attract outside investment,further expand its current technology platforms, and broaden itsproduct and service offerings.• Unlock members' equity values. Over the years, many retired CME ownersexperienced substantial declines in their seat values and turned to incomefrom leasing.These owners became generally less interested in member opportunityon the floor They became more interested in maintaining theirasset values and deriving income from them and became more like traditionalstockholders than exchange members. Demutualization would unlockequity value and provide shareholder returns.• Provide a signal and a currency for working with strategic partners. Technologyfirms, as well as firms interested in acquiring an equity stake in the CME,prefer to work with a demutualized corporation, rather than a memberownedmutual organization. Demutualization and conversion of membershipsinto shares were expected to create a valuable currency for strategic alliances.The board of directors of NASDAQ believed that it was in the interest ofboth its shareholders and the investing public for NASDAQ shares to be publiclytraded and widely held through an initial public offering (IPO). 5 As a for-profit, stockbasedcompany governed by the market's leading participants, NASDAQ would bemore agile, flexible, and effective in responding to industry and market conditions. Publicownership would have two main advantages. First, an IPO and the capital it provideswould allow NASDAQ to continue to improve its market and compete effectivelywith domestic and international competitors, facilitating the sale of its remainingequity ownership, and creating a liquid acquisition currency for NASDAQ. Second, anIPO would provide a valuation benchmark and liquidity for current investors and allowNASDAQ to control the development of the trading market for its stock NASDAQ'sinterests would be aligned with those of key participants. NASDAQ would have bothan initial infusion of capital and easier ongoing access to funding.Some non-U.S. exchanges have demutualized for somewhat different reasons,although competitive pressures and the resulting need to effect governance changesare a common theme.The Stockholm Stock Exchange demutualized to effect privatizationof the exchange and reform of securities regulation, in part to compete withOM Gruppen AB (OM), which began to trade derivatives, a product Swedish stockexchanges were forbidden to trade. The Stockholm Stock Exchange had no ownersCopyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub1Nasdaq to Become a Public Company, available at http://www.nasdaqnews.com/news/pr2001/ne_sectionOI_l40.html.