CIO — CEO Craig Donohue wants the Chicago Mercantile Exchange (CME) to be the fairest, fastest, most reliable and most liquid exchange for trading options and futures. He envisions it as a place where buyers and sellers can interact whether they’re individual or institutional investors, and regardless of their credit profile. He also wants the exchange to provide superior clearing, settlement and risk management capabilities for its customers, who rely on its systems every day to trade an average of $2.5 trillion worth of contracts for futures and options on currencies, commodities, interest rates, equity products and even the weather.
"We want to be the market leader in terms of using technology to become faster, more robust, and to improve our functionality and customer service," says Donohue.
To transform Donohue’s vision into reality, the CME has developed software programs to increase trading activity in financial markets, to protect securities dealers from financial risk, and to enable new services, such as trading options electronically. Over the years, the CME has also invested hundreds of millions of dollars in IT to increase the speed, flexibility and reliability of Globex, the groundbreaking platform for electronic futures trading that it launched in 1992.
Those IT investments have put the CME on a steady path toward achieving Donohue’s goals. The CME is known in the industry as the "Avis" of financial exchanges—the marketplace that tries harder to develop and deliver the products and services that its customers want. "The CME has always been viewed as the hungrier, more innovative, more progressive and generally more customer-friendly exchange compared to the other derivatives exchanges," says Michael Gorham, director of the Illinois Institute of Technology’s Center for Financial Markets, who worked for the CME for 18 years.
Today, the CME, which was founded in 1898 as the Chicago Butter and Egg Board, is one of the world’s largest financial exchanges, second only to the Eurex in Frankfurt, Germany, in the number of contracts traded annually. In 2005, the CME traded more than 1 billion contracts while the Eurex exceeded 1.2 billion, but the CME is catching up: It grew by 34 percent last year compared with the Eurex, which grew by 18 percent. The CME’s trading volume has skyrocketed almost 500 percent since 2000.
Technology propels the CME’s growth. Almost every major technology upgrade has increased trading activity. And the more trades the CME can match between buyers and sellers, the more money it makes. Donohue understands that if the CME’s systems sputter or don’t offer the functionality customers need to execute certain trading strategies, those traders will find another exchange. To satisfy his customers, he has authorized tens of millions of dollars’ worth of IT spending during his two-and-a-half-year tenure as CEO. In 2005 alone, the CME spent close to $58 million to maintain its hardware, software and communications infrastructure. "The vast majority of our expenses and capital investments relate to technology. We view ourselves as a technology company because technology is the main way we distribute our products," says Donohue, who joined the CME as an attorney in 1989. He and CIO Jim Krause both rose through the ranks of the exchange and have worked together on every major technology initiative—from the development of Globex to the creation of software to facilitate trading options electronically, and everything in between.
