CME Group associate general counsel: Exchange control

Since associate general counsel Adrienne Seaman arrived at CME Group, conflicts and new regulation have forced massive changes

Adrienne Seaman
Adrienne Seaman

Adrienne Seaman had a tough challenge when she left Taylor Wessing to take over as CME Group director and associate general counsel for Europe, Middle East and Africa (Emea) in 2008.

The global financial exchange, formed in 2007 out of the mergers of the Chicago Mercantile Exchange and the Chicago Board of Trade, had previously used Shearman & Sterling financial regulatory partner Barney Reynolds as its UK counsel. But Shearman’s role acting for rival IntercontinentalExchange (ICE) created a commercial conflict that, given the competitive nature of the industry, meant it could no longer advise CME.

Pitch and role

Seaman, a former Stephenson Harwood and Taylor Wessing partner, invited a number of firms to pitch in March 2009. Some of the big names in the field were conflicted, but it is thought that magic circle firms were among those to turn up for the beauty parade.

Norton Rose, where the pitch team was led by corporate and financial regulatory partner Jonathan Herbst, won the mandate, paving the way for an impressive relationship with the expansive derivatives and futures exchange operator.

“[Skadden Arps Slate Meagher & Flom] is our first-stop-shop,” Seaman notes. “In quite a lot of our Emea work we work with Norton Rose.”

The shift towards Norton Rose was no catastrophe for Shearman:

in ICE it had a prized client. In any case, CME’s main law firm on a global scale was Skadden, where former Shearman London corporate partner Adrian Knight advised

CME, for ­example, on its acquisition of ­electronic trading platform ­Swapstream.

Shearman had provided UK strategic advice to CME and advised on its 2006 office move to 33 Cannon Street, with City real estate partner Ian Nisse and associate Lucy Keeble leading. Skadden is still CME’s main global adviser.

“We [used to use Shearman],” Seaman confirms. “We parted ways a few years back because of a commercial conflict. At that point we did a review. We shortlisted firms, interviewed them all and found Norton Rose to be by far the best option. It’s been a great relationship. We had this idea we would educate them and they would educate us. We’re a good client for them, we do a lot.”

CME’s ambitions in Europe and the potential for outside lawyers has been widely documented. The pre-merger Chicago Mercantile Exchange has had an office in London since the 1980s, but the growth spurt happened in the late 2000s.

It acquired credit derivatives market data provider Credit Market Analysis in 2008, another mandate for Skadden. The same year, CME decided to make London into something of a regional hub and expand its support functions.

“[Managing director for international products and services] Bob Ray came over from the US to spearhead things [in January 2009], Seaman recalls. “This was […] significant – to put a flag here to say we’re keen on international expansion. To have him here was important,” she says.

The global expansion drive – culminating in the launch of a clearing house in London in 2011 – meant more need for a local legal team, as did mushrooming regulation.

“[With a] plethora of proposed regulation, shocks went through the system,” adds Seaman. “We decided to open a clearing house here, which  led to a need for additional legal support. We had the representative office and also acquired CMA, which meant we wanted to build up legal support. It was the wish to internationalise.”


Big plans

To add to this, CME was looking to expand in the region outside the UK, notably through a strategic partnership with the Dubai Mercantile Exchange (DME), a matter run out of London. Earlier this year it doubled its stake in DME to 50 per cent. Seaman says there is hardly space on her office wall to hang all of the firm’s global business plans.

In 2008 CME chose to hire an in-house lawyer for Europe. Seaman was an obvious choice because of her background as a technology partner at Taylor Wessing. But despite what she describes as the “international explosion” of CME and the exchanges sector, things were testing from the start.

“We’d just acquired CMA [in March 2008], a market data provider. That needed business support. It made sense to have someone who was a bit commercial, a bit financial services, a bit techie. It’s a unique skill-set. I arrived in August 2008. Exactly two weeks later Lehman went down.”

IT girl

“My background was in technology and financial services,” says Seaman. “I spent most of the dotcom boom working on things like internet banks and big chunky outsourcings. When CME was first looking for a lawyer here, they wanted somebody who could be a bit of an all-rounder. I’ve heard people say we’re a technology company, but I’m not sure if that’s the official line.”

Seaman has eight Emea lawyers reporting to her and no secondees, while she herself reports to senior managing director, general counsel and corporate secretary and former Skadden counsel Kathleen Cronin in Chicago.

The legal team is split into M&A, regulatory and market surveillance groups, with the team spreading to New York when it rolled out its acquisition of NYMEX, parent company of the New York Mercantile Exchange, in 2008.

The company’s acquisitive and global nature means it can only use firms with international reach and technical nous, but the spate of regulation means there is plenty to keep lawyers busy.

Norton Rose’s Herbst and newly promoted financial services partner Hannah Meakin have been advising CME in London alongside Brussels lobbying consultancy Hume Brophy on the proposed European Markets Infrastructure Regulation (Emir), which would overhaul the European derivatives market.

The European Association of CCP Clearing Houses, an umbrella group of which CME Clearing Europe is a member, warned in March that the plans to force more trades to be processed through clearing houses would lead to expensive reporting obligations.

“It is what it is,” Seaman muses. “We’re watching it closely and responding to it. We’ve been engaged with the institutions in Brussels talking about options for regulation and providing feedback on how some of the regulations will work. It’s clear that there will be more regulation of clearing houses. The market has to be confident.”

Not that Seaman thinks Emir is a wholly neat piece of work. “I think we might have done things rather differently if we’d been writing it,” she ­concludes.

Adrienne Seaman

CME Group

Title: Director and associate general counsel, Emea

Industry: Futures and derivatives exchanges

Reporting to: Senior managing director, general counsel and corporate secretary Kathleen Cronin

Turnover (2011):$3.3bn (£2.1bn)

Employees (global):2,700

Legal capability:Nine (Emea)

Main external law firms:Skadden Arps Slate Meagher & Flom (global), Norton Rose (UK)

Annual legal spend:£1m (Emea)

Exchange management:  competition and transparency, by Mark Hemsley, CEO, BATS Chi-X Europe

The European equities markets have never been more competitive, or more in flux. The 2007 implementation of the Markets in Financial Instruments Directive (MiFID) and the creation of multilateral trading facilities changed equities trading in Europe, from an activity conducted on national stock exchanges that had a virtual monopoly in securities trading in companies listed by country, to one that allows investors to choose between venues and trade listed securities on a pan-European basis.

Yet remaining complexities and challenges must be addressed for the full benefits of competition to be realised. The industry is grappling with the fallout from the financial crisis and eurozone volatility, plus the finalisation of two key policies: European Markets Infrastructure Regulation, which sets criteria for centralised over-the-counter OTC clearing, and a review of MiFID that aims to address issues raised during the  crisis and commitments by the G20 to improve the transparency of markets such as derivatives.

Forthcoming reforms should address areas in which the aims of MiFID will not be achieved by market forces alone. Indeed, a number of concepts under discussion are by-products of a more competitive, innovative and technologically developed equities trading environment – for example increased automation of traditional trading strategies.

From the perspective of an exchange operator, it is imperative that market developments are appropriate and proportionate for all investors to leverage efficiencies and opportunities created by a  pan-European securities market that cultivates capital market growth.