WASHINGTON - Chicago Board of Trade members last week narrowly elected David Brennan as exchange chairman, toppling incumbent Patrick Arbor.
With differing views on the future of CBOT - Arbor supported controversial mergers and electronic innovation to compete with global over-the-counter rivals, while Brennan favored a more moderate pace - the race appeared close up to election day.
Still, some analysts called the incumbent's loss a surprise. Arbor had served three consecutive terms as chairman before losing on a vote of 608 to 589.
The CBOT is home to a range of futures contracts spanning the Treasury yield curve, as well as a contract on municipal bonds and the so-called munis-to-bonds spread. Brennan, 41, will serve a two-year term as chairman. He trades as an independent, largely in the soybean futures market.
Arbor, 62, was not endorsed by CBOT's nominating committee, which gave the nod to Brennan. Seven former CBOT chairmen also sent letters backing Brennan. Arbor got on the ballot via a petition by his supporters.
"With the election now behind us, it's time to focus our energies on the business challenges facing us," Brennan said in a statement. "It is important for all of us to recognize that only by drawing on the skills and talents of all our members and member firms are we going to be successful in today's highly competitive environment."
The latest competitive challenge surfaced just days ahead of the election, when the National Association of Securities Dealers - parent company of the Nasdaq stock market - announced it was exploring launching electronic Treasury futures. In so doing, NASD would provide Wall Street firms with terminal trading, allowing those firms to avoid fees tied to using a futures exchange.
Already, the Cantor Exchange, operated by the New York Mercantile Exchange and Cantor Fitzgerald LP, this year introduced computer terminals to directly compete with the Treasury bond futures contracts offered on the CBOT floor. Customer response has been lukewarm to Cantor's product so far, and both Brennan and Arbor said their initiatives for the CBOT would ensure that pit trading, favored for its liquidity, would be around for a long time.
The 150-year-old Chicago institution has for the most part relied on an auction-style or open-outcry practice of trading futures. That tradition is often deemed costly and inefficient by critics who favor reducing manpower for computers. The exchange already offers what's known as Project A electronic trading in some of its contracts after daytime open-outcry hours.
Arbor had championed talks to merge CBOT with Eurex, a Swiss-German all-electronic exchange. In joining Eurex, CBOT would be able to more readily market its products to overseas customers, supporters argued. Brennan was outspoken in his disapproval for the trans-Atlantic alliance, citing its significant cost to the exchange.
In addition, the outgoing chairman was behind efforts to combine order- clearing operations with Chicago's other trading institution, the Mercantile Exchange. That initiative was shot down by his board earlier this year.
Arbor also faced criticism by some CBOT members for his suggestion that it would eventually be in the best interest of both CBOT and the Merc to merge into one exchange.
Arbor, who trades agricultural futures, is a principal with Shatkin, Arbor, Karlov & Co.
Meanwhile, CBOT members also elected Michael Ryan, an independent trader, as second vice chairman; James Cashman, Douglas Kurzydlo, Joseph Niciforo, and Joel R. Riechers as member directors; James Curley as nonresident director; and J. Andrew Wallace as an associate member.
