Zero-Sum Game

In 2007, a stranger-than-fiction multibillion-dollar bidding war for the Chicago Board of Trade (CBOT) erupted between the Chicago Mercantile Exchange (CME) and Atlanta’s IntercontinentalExchange (ICE). Zero-Sum Game: The Rise of the World’s Largest Derivatives Exchange takes readers behind the scenes of this battle to tell the gripping—and often comical—story of how the historic merger between CME and CBOT almost didn’t happen.

Author Erika S. Olson, a managing director at CBOT during the bidding war, delivers a blow-by-blow account of the fight for the world’s oldest futures exchange, taking you inside CBOT’s landmark Chicago Loop headquarters, onto the high-octane trading floor, and into executives’ offices.

Through the lens of the CME/CBOT deal, Zero-Sum Game:

• Introduces the colorful and outspoken personalities who call the shots in this close-knit and frequently misunderstood industry
• Details the reasons behind the recent, spectacular growth of a market that’s existed for over 160 years
• Explains how derivatives affect the lives of average consumers worldwide by influencing everything from interest rates on credit cards to the cost of a cheeseburger to the price of a gallon of gas
• Reveals the inner workings of futures exchanges, and differentiates the various types of derivatives that are routinely lumped together and vilified by the media

Erika S. Olson is a former managing director of the Chicago Board of Trade and spent over ten years working in and consulting to the financial services industry. She received her MBA from Harvard Business School and her BBA from the University of Michigan Ross School of Business.

Preface ix

Cast of Characters xiii

Chapter 1 Welcome to the Jungle 1

Chapter 2 Into the Groove 17

Chapter 3 This Is How We Do It 30

Chapter 4 Don’t Speak 46

Chapter 5 Wanna Be Startin’ Somethin’ 58

Chapter 6 Dirty Laundry 74

Chapter 7 Under Pressure 88

Chapter 8 ICE ICE Baby 102

Chapter 9 War 117

Chapter 10 Suspicious Minds 132

Chapter 11 Land of Confusion 147

Chapter 12 Fight for Your Right 161

Chapter 13 Down Under 177

Chapter 14 Take the Money and Run 192

Epilogue 208

Notes 221

Glossary 237

References 240

Acknowledgments 241

About the Author 247

Index 249

ERIKA S. OLSON is a business consultant, financial writer, and blogger, and was a managing director at the Chicago Board of Trade during the bidding war between CME and ICE. She holds a BBA from the University of Michigan Ross School of Business and an MBA from Harvard Business School.

In 2007, a stranger-than-fiction multibillion-dollar bidding war for the Chicago Board of Trade (CBOT) erupted between the Chicago Mercantile Exchange (CME) and Atlanta's Inter-continentalExchange (ICE). Zero-Sum Game: The Rise of the World's Largest Derivatives Exchange takes readers behind the scenes of this battle to tell the gripping, and often comical, story of how the historic merger between CME and CBOT almost didn't happen. Author Erika S. Olson—a former managing director at CBOT—reveals why these bitter crosstown enemies put aside more than a century of bad blood in order to form CME Group, a behemoth that now controls 98 percent of the regulated futures market in the United States. From fast food, electricity, and interest rates, to building materials, jewelry, and gas, the prices of countless products and services that companies and consumers use every day are influenced by contracts traded at CME Group.

Olson delivers a blow-by-blow account of the fight for the world's oldest futures exchange, taking you inside CBOT's landmark Chicago Loop headquarters, past security guards, onto the high-octane trading floor, and into executives' offices. Along the way, she makes the inner workings of futures exchanges accessible by explaining what these institutions do, how futures contracts work, and who benefits from investing in derivatives. She also provides background and insight on the men in control of this powerful, tight-knit, and frequently misunderstood industry.

Zero-Sum Game is the incredible inside story of how the world's largest and most diverse exchange came to be, how the creation of CME Group forever altered the landscape of the financial services industry, and what it all means for the global economy . . . and you.