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Below is a sample of an IPO that received our highest rating.

CBOT Holdings BOT IPO $50-$52 3.2 million shares Underwriter(s) Credit Suisse, JP Morgan, Citigroup Proposed trade date 10/19.

One of the world's largest derivative exchanges, offering futures and options on futures.

CBOT Holdings which is the operator of the number 2 futures exchange, and a key trading floor for agricultural commodities is set to open for trade on Wednesday. CBOT has been a long awaited IPO. This is especially since the spectacular performance of The Chicago Mercantile Exchange CME (actually went Public at $35.00 in 12/02)… current closing quote $317.20 which is a 52 week increase of 85.33 percent or 800 % since its debut. CBOT originally filed at a price range of $33-$36.

Despite the extremely large demand for this offering it is not a large deal. This IPO is estimated, if priced at the high end, to bring in approximately 156 million. On average this year IPO's included 11.5 million shares and brought in on average 174.5 million. Price to book ratio is a ratio that is often used in comparing the value of one similar company versus another. The lower the value the better. In the case of CBOT the price to book is 5.4. If we take that number and compare it to Chicago Mercantile Exchange CME it is 11.7, the Nasdaq Stock Market NDAQ 14.1 and 11.9 at online brokerage OptionsXpress OXPS.

The amount of shares being offered by CBOT is only 6.1 percent of the outstanding shares. Therefore, one can probably surmise that a secondary will not be too far in the future if CBOT trades as well as expected. CBOT handles about 15 percent of all global listed futures and options, clearly making it one of the world's leading exchanges for derivatives. Trading volume in 2004 hit 600 million contracts, a 32 percent increase from 2003 (454 million contracts). Net Income in 2004 was 42 million versus 30.7 million in 2003. The offering proceeds will be used for general corporate purposes, including upgrading technology and possible future acquisitions.

CBOT relies on the Chicago Mercantile Exchange CME to clear its trades. This past week has been eventful for CME. Refco RFX one of the Chicago Mercantile Exchange main customers announced that it will shut down Refco Capital Management, its nonregulated offshore securities, and foreign exchange broker, due to liquidity problems. The CEO who has been charged with Securities fraud allegedly moved 400 million dollars of bad debts owed to Refco to a separate company he owned. However, despite these potentially serious issues, Refco was deemed last Thursday by the Chicago Mercantile as a member in good standing and continues to meet its obligations to the exchange. It is strongly expected that current Refco customers will move their business to other firms on the exchange. As expected there are numerous class action suits against Refco. The Chicago Mercantile exchange stated in a written statement that Refco accounts are protected through financial safeguards and risk management policies already in place. My research since the incident coupled with the fundamentals of CBOT allows me to believe that an outstanding IPO is imminent. Rating = 5

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