Zero-Sum Game: The Rise of the World's Largest Derivatives Exchange

by Erika S. Olson

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 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 :

Genres: Finance, Business, Nonfiction, History

272 pages, Hardcover

First published October 14, 2010

Reviews

[Frank Stein · Rating 3 out of 5]

As a slice of Chicago trading life in the early 2000s this is interesting, but mainly it is an overlong tale of every jot and tittle that ever went down during the merger of the Chicago Mercantile Exchange (the "Merc" or CME) and the Chicago Board of Trade (CBOT) in mid-2007. As the author relates, through most of their history they were bitter rivals and it was hard for employees at either to ever imagine them coming together. But Terry Duffy of the Merc and Charles Carey of the CBOT both were Irish-American South Side Chicagoans who made an effort to try it out. The Merc had gone from playing second-fiddle to the larger exchange and it had IPOed first. The CBOT had fallen behind on things like electronic trading and it IPOed just in 2005 and had long resisted their essential ag contracts to go "side-by-side" with both pit and electronic trading. Thus the merger was effectively a purchase of CBOT by CME.

The merger was complicated however, because Jeff Sprecher, who had turned an incohoate California energy producer into the Intercontinental Exchange (ICE) in Atlanta made an even juicier offer for CBOT, valuing it at well over $10 billion. A bidding war started, often involving the tightly held B-shares still owned by the CBOT members and their claim to have open seats on the Chicago Board of Options Exchange (CBOE) which had spun off back in 1973. It was a tight-knit group both sides had to convince, as well as the DOJ, but in the end the Merc, with a technically smaller deal, but more experience and tradition, won out, and the merger went off smoothly, soon leading to the total purchase of NYMEX.

The bare bones of the story are interesting, as well as insight into how traders worked and how the economics team designed new "products" for the exchanges and encouraged them with sweet market-maker deals, but this is just too long with too many characters (all called by their first name, since this is an insider account, which can get confusing.) It would have been better if it was 1/3 the length and more focused.

[Jonathan Waite · Rating 4 out of 5]

Interesting, easy read for anyone wanting to know more on the history of CME/CBOT merger, which formed the most important futures market in the world. While the author's preface statement calling the story a "stranger-than-fiction battle" is a bit of an oversell, the story is compelling nonetheless and provides a behind-the-scenes retelling of the back-and-forth battle for the 159-year-old CBOT exchange.

[Jake Sylvestre · Rating 4 out of 5]

Fantastic narrative history of the CME/CBOT merger.

[Brad Johansen · Rating 3 out of 5]

Simple, straight forward play-by-play of the merger between the Chicago Mercantile Exchange and Chicago Board of Trade.

[Value investor · Rating 4 out of 5]

It is an insightful book to learn about the merger of CME and CBOT together with an unexpected bid from ICE.

[David Nealis · Rating 4 out of 5]

Zero-Sum Game: The Rise of the World's Largest Derivatives Exchange

Zero-Sum Game is a well-written and very informative book. The author, a former Chicago Board of Trade (CBOT) employee Erika Olson, does an excellent job describing the merger of two bitter rivals; the Chicago Board of Trade and the Chicago Mercantile Exchange and the multibillion-dollar bidding war between the Chicago Mercantile Exchange (CME) and the InterContinentalExchange (ICE) for control of CBOT. Olson also does a great job interweaving the history of the exchanges, the mechanics of the exchanges and giving us amusing insight to the Who’s who of the industry, all in a very easy to read format.

Being involved in the industry I was drawn to the book, I thought I was buying a book that would provide me insight to the history & cultures of the CBOT and the CME; I never thought that I was also buying a thrilling page turner which the book turned out to be!

This book is a must read for anyone in the futures industry, I would also recommend this book to anyone interested in the politics of a merger.

[Emily · Rating 4 out of 5]

Really interesting non-fiction about the merger of the two 100 year old exchanges in Chicago. The author was on the merger team and is still a Chicago resident. This impacted my work so it was interesting to hear the inside scoop. I probably wouldn't have picked it up if it hadn't been for work - but it was such an easy read and written for someone who has no knowledge of the industry.

I'd recommend this if you have been curious about the financial markets. This is a good introduction to the theories while really being mostly a business/merger story.

[David · Rating 4 out of 5]

A zippy account of the CBOT CME merger. The only downsides are that she did not appear to have access to the legal advisers, so this is not the M&A lawyers drama like Barbarians at the Gate. That is actually probably to this books' credit.

The other big problem is that so much changed at this time -- including the complete collapse of the pit in comparison to screen trading that it's very difficult to draw any morals from this book's piece if the story.

[Benjamin Warren · Rating 3 out of 5]

good book to read if you know anything about exchanges or the futures markets. Hard to keep track of who is who as there are so many characters with "bob smith" names. Overall, I liked it.

[Mike Chrzanowski · Rating 3 out of 5]

Writer's diction is passive. Does not analyze, very descriptive and observant so far.

[Rose · Rating 3 out of 5]

An insider's view of the CME/CBOT merger. Having been an insider in this merger myself, I think the author could have made this a more interesting story.

[James deBoer · Rating 3 out of 5]

An ok story, quite dense and lacking in perspective.

[Rrrrrron · Rating 3 out of 5]

Interesting inside story.