5 FromPrivateClubto PublicCompany ExecutiveSummary Member-owned exchanges were the standard model for many years and did a fairly good job. However, an exchange owned by members meant that members often took precedence over customers. In this chapter we explain what a member- ship is and how those memberships were transformed into a trading right and a bucket of common stock under a process called demutualization, and we review case studies of the CME, CBOT, CBOE, NYMEX, and NYSE. We also explain the drivers behind this important transformation. Introduction In this chapter we explore the second of the four basic transformations of the exchanges: the conversion of member-owned exchanges into publicly traded