Demutualization usually involves the sale of a mutual, by its members, to a non-mutual company or to the stock market.
As a result of demutualization, members of a mutual usually receive a windfall payout. This payout usually takes the form of shares in the successor company, a cash payment, or a mixture of both.
The Chicago Mercantile Exchange became a shareholder-owned corporation in 2000 through a public offering. "The road to this initial public offering began in June 2000, when Exchange members voted overwhelmingly to transform the then not-for-profit, membership-owned organization into a for-profit, shareholder-owned corporation. On Nov. 13, 2000, CME became the first U.S. financial exchange to demutualize into a shareholder-owned corporation." ( (http://www.cme.com/about/ins/caag/profitcomp2799.html))
The Chicago Board of Trade is seeking approval from the SEC to do the same thing. "The CBOT presently is a self-governing, self-regulated Delaware not-for-profit, non-stock corporation that serves individuals and member firms." However, "the Board of Trade of the City of Chicago, Inc. (CBOT) has filed a Registration Statement on Form S-4, including a preliminary proxy statement and prospectus, regarding the restructuring transactions with the SEC" ( (http://www.cbot.com/cbot/pub/page/0,3181,1215,00.html)).
With a demutualised structure, exchanges will be able to re-configure their business operations and initiate a fundamental transformation of its strategic position to meet stakeholder needs.
The final decision was based on the value of the contributions of the various stakeholders, given their legal status with regard to ownership and control, as well as the direct and indirect historical economic contributions made by the various parties to the growth of the exchange over time.
It was decided that a total of 40% of the value of the demutualised exchange would be allocated to the stockbroking industry of which 30% would be allocated to stockbroking companies and 10% to remisiers.
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