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Chicago Mercantile Exchange Chairman Holds
First Conversation with Leaders for Fall 2004


Click to view Duffy's speech

When Terrence Duffy spoke at the College of Business, he asked and answered a question on the minds of many graduate students: Is having a graduate degree more important than having only an undergraduate degree?

Duffy, the 46-year-old chairman of the Chicago Mercantile Exchange® (CME), told them what he is looking for in potential hires. What's important, he said, is what they have learned and how they will apply those skills. "I'm looking in the best interest of shareholder," Duffy said. "We want smart people, people who know the fundamentals."

Duffy, who has been with the exchange for nearly 25 years, was on hand to address College of Business undergraduate honors students and MS Finance and MBA graduate students at the first Conversations with Leaders session for the fall on October 5. To the more than 60 students assembled for the lecture series, Duffy gave tips on how to be a successful businessperson. His advice started with his motto: start small, think big.

His own career has followed that maxim. At age 22, he started at the CME as a clerk. He rose to the ranks of member, then board member and, eventually, chairman. As a former trader, he had the credentials that gave trust to and helped him relate to other board members.

"You can't bow down to sacred cow of being member of the exchange," he said.

David Prosperi, Terrence Duffy, and David Ikenberry.

Terrence Duffy (center), chairman and CEO of the Chicago Mercantile Exchange and David Prosperi '75 (l), CME director of public relations, met with David Ikenberry, chair of the Department of Finance, to discuss Duffy's presentation as part of the Conversation with Leaders series this October.

He told the students that innovation is the best motivation and that they should think differently. The exchange began in 1898 as a private association to assist in the butter and eggs trade. In 1919, it evolved into the CME. In 1972, it began trading futures and, in 1997, it began trading e-mini contracts. And the world has followed the CME's lead. Today, it is the largest futures exchange in the world.

It also was the first exchange to go public, Duffy said. The initial public offering was listed at $35 a share. Today, a share is valued at more than $170. Other exchanges are thinking about going public because of the lucrative business the CME has shown is possible. In 2003 alone, 641 million contracts, with a value of $334 trillion, changed hands at the exchange, Duffy said.

Duffy advised the students to be disciplined, have a strategy, and execute it thoroughly. CME has such a strategy. The exchange focuses its efforts on growing existing business, broadening its product, capturing new opportunity through acquisitions, and also respecting competition in a much more global marketplace.

He also warned of never doing or saying anything "you would not want to see in the papers," reminding the students about the scandals at Enron, Arthur Andersen and WorldCom. "You must have a moral compass to do what's right even when no one is looking," he said.

Following Duffy's speech, Dean Avijit Gosh posed the first question: How was Duffy successful in gaining consensus for a radical change such as going public? Duffy answered that he stressed his fiduciary responsibility. He felt he had to do what was in the best interest of investors.

Faced with another question about what students should do to look ahead to their future, Duffy stressed the importance of discipline. He said he learned that lesson the hard way, when in 1983, as young trader at the CME, he lost in one day the money his parents gave him after they mortgaged their house. A seasoned trader taught him the importance of discipline and he got the money back.

"It's the hardest thing in the world to teach, but if you don't have it, you won't be successful," he said.

Terrence Duffy, chairman of the Chicago Mercantile Exchange.Terrence A. Duffy has served as chairman of the board of Chicago Mercantile Exchange Holdings Inc. (CME Holdings) and chairman of the board of Chicago Mercantile Exchange Inc. (CME) since April 2002. He has been a CME member since 1981 and a Board member since 1995. As the company's vice chairman, Mr. Duffy served on the executive, compensation, nominating, strategic planning and regulatory oversight committees.

In 2002, he was appointed by President Bush to serve on a National Saver Summit on Retirement Savings. He also was appointed by President Bush and confirmed by the U.S. Senate in 2003 as a member of the Federal Retirement Thrift Investment Board (FRTIB), which administers the Thrift Savings Plan, a tax-deferred defined contribution (retirement savings) plan for federal employees that currently has more than 3 million participants and $132 billion under management.

Duffy attended the University of Wisconsin-Whitewater, studying business administration.

--Jonathan Mendes
October 2004