By Alexander Osipovich

Thousands of jostling traders once packed the floors of Chicago's futures exchanges, before the advent of high-speed computerized trading turned them into relics of a bygone era. Now, some of them will finally have their day in court.

On Monday, a trial is set to begin in a long-running class-action lawsuit filed by traders who say that exchange giant CME Group duped them out of the privileges they held as members of the city's once-elite community of floor traders.

The plaintiffs, who estimate that they are owed about $2 billion in damages plus interest, say the company broke its promises to them when it opened a data center for electronic trading that effectively doomed the old trading floors. CME has called the lawsuit baseless.

A spokeswoman for CME declined to comment. The company repeatedly tried to get the suit thrown out, but failed each time.

The lawsuit, filed in 2014, has dragged on so long that one of the original plaintiffs has died. Hundreds of former floor traders could be affected by the outcome of the jury trial at a county courthouse in downtown Chicago. It is expected to last several weeks.

At the core of the dispute is a series of deals that created CME Group, a financial behemoth that runs markets ranging from interest-rate options to futures on wheat, gold and oil. CME boasts a $100 billion market cap and some of the fattest profit margins of any company in the S&P 500.

But until the turn of the 21st century, it was a nonprofit. Known then as the Chicago Mercantile Exchange, it was a cooperative owned by its members -- the traders who held "seats" allowing them to wheel and deal in its bustling, open-outcry trading pits.

Before electronic trading, only traders who owned or leased seats could access the floor. Such traders could profit from being at the heart of the market's action, making memberships a precious commodity.

In the 1990s, soybean trader Gerald Petrow spent hundreds of thousands of dollars to become a member of the Chicago Board of Trade, an exchange that later merged with CME.

"Me being able to come down to the Board of Trade and get a membership, a full membership, was generational -- a generational event...It was supposed to change my children, my grandchildren," Petrow, one of the lawsuit's plaintiffs, said in a 2020 deposition. He added that he was among the first people in his family to graduate from college.

CME transformed itself into a for-profit company in 2000. To win members' support for the transaction, the exchange gave them two kinds of shares. "A shares" became CME's publicly traded stock. "B shares" were equivalent to the old memberships, allowing holders to benefit from "trading floor rights and privileges," the exchange said in a 2000 prospectus.

Seven years later, when CME merged with the Chicago Board of Trade, creating what was then the world's largest derivatives exchange, CBOT members such as Petrow were granted a similar deal.

But the price of the old-style memberships has stagnated since then. From January 2008 to last month, the price of CME's most valuable class of B shares slid from $1.6 million apiece to $875,000, according to data on the exchange operator's website. Over the same period, CME's A shares more than doubled in value.

The key factor behind the divergence, according to the plaintiffs, was the 2010 launch of CME's data center in the Chicago suburb of Aurora, Ill. High-frequency trading firms pay for the right to place their servers next to CME's computer systems in Aurora, allowing them to execute trades in millionths of a second and obtain data from the exchange as quickly as possible.

In effect, Aurora became CME's new trading floor -- but the members didn't get the trading-floor rights that they had been promised, the plaintiffs argue. This was "a betrayal of the basic bargain," they wrote in an April court filing.

CME denies breaking any promises. It says B-share owners were only guaranteed the right to access open-outcry trading floors -- not any sort of electronic floor. CME has also said that the A shares it gave to many floor traders in the 2000s are now valued at millions of dollars.

In recent months, prices for the beaten-down B shares have climbed as some traders have speculated that CME could be forced to buy them out to resolve the lawsuit. CME Chairman and Chief Executive Terrence Duffy has denied any such plans and voiced confidence that the company will prevail.

"We feel very strong about our position," Duffy said at CME's annual meeting in May. Last month, he received a subpoena compelling him to testify at the trial.

Write to Alexander Osipovich at alexo@wsj.com

(END) Dow Jones Newswires

July 07, 2025 05:30 ET (09:30 GMT)

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