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Chicago Exchanges Talking Merger

March 24, 2000

CHICAGO (AP) _ The Chicago Board of Trade and the Chicago Board Options Exchange are considering merging, officials close to the two exchanges said today.

The Chicago Tribune reported that a merger may be an option for the two exchanges to resolve a dispute that has stalled the Board of Trade’s proposal to reorganize into two separate corporations.

The Board of Trade has threatened legal action in that dispute.

Meanwhile, members of both exchanges told the Chicago Sun-Times that a merger could help both compete with companies that are trying to create electronic markets for financial products.

Letters traded by the chairmen of the two exchanges this week indicate the CBOE has hired an investment banker to look into merger possibilities with Board of Trade bankers.

Sources close to the exchanges speaking on condition of anonymity confirmed the existence of the letters today. But one said any possible merger remains far in the future because of all the hurdles that would need to be cleared.

``We have a unique opportunity to accomplish something significant,″ CBOE Chairman William Brodsky wrote to David Brennan, his counterpart at the Board of Trade. Brodsky said he hoped the Board of Trade would put any legal action on hold.

In his reply, Brennan agreed to postpone legal action for two weeks, ``expecting our investment banking teams will be able to work out a plan for our consideration.″

A merger would mean job losses within the industry. But Lee Stern, a longtime Board of Trade member, said merger talks ``will be a benefit to everybody involved.″

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