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CME GROUP TOUR CHAMPIONSHIP

November 14, 2018

Naples, Florida

THE MODERATOR: All right, everyone, thanks so much for coming. I want to take a moment here just to remind you of a few housekeeping announcements. This announcement is an exciting one between Mike Whan, the LPGA commissioner, and Terry Duffy, chairman and CEO of CME Group. We'll have questions about this announcement only.

If you have questions for Mike following, he will be available afterwards and also on Friday for the State of the LPGA. Reminder this announcement is strictly embargoed until 9:00 tonight. We will have a transcript available for you, but just a reminder that until 9:00 tonight we appreciate you keeping it inside these four walls. At this point, I will turn things over to Mike Whan.

MIKE WHAN: Thank you all for coming over here. As you can see, this is the nicer of the two Ritzes. Thanks for having us. In my nine years as commissioner I've never brought notes to an announcement, but this one required notes. This is really about the Race to the CME Globe.

About five years ago Terry and I talked about the race for the first time, and I really felt like at the time we hung up the phone we had just changed women's golf in such a positive way. That's why whenever I look on my cell phone and see it ringing, I answer it when it says Terry Duffy.

This year when he called he said, I think it's time to do it again. This announcement is a really about setting a new standard in women's golf. I would love to lie to you guys and say that I called Terry 16 times and pushed and pushed him for it, but it was his idea. It was their idea. They came to me with this, and that's why it's so exciting.

It's about creating more drama, more excitement. It's about creating more payout quite frankly. The new Race to the CME Globe is easier to understand and easier to follow, and quite frankly it's huge to win.

So in simplest terms, I think what Terry and CME are doing this week, which will start in 2019, is history setting. We're going to double this purse. We're going to go from two and a half million to five millions at this event starting next year.

Rather than 72 players making the Race to the CME Globe, 60 players will make it to the Race. We'll still race all year. There will be points at every tournament. Once you're one of the 60 to get in, we throw the points out the door and anybody can win the final event.

The winner's check will be $1.5 million, so it will be the largest winner's check in women's golf history. To think that the best players in the world won't be paying more attention to the CME Group Tour Championship next year would be wrong.

As always, Terry is putting this final event on network TV so our finale finishes in a big way. Beyond that, Terry is also setting a new stand in how CME and the CME Tour Championship affects the charity component. Maybe Terry, tell them a little bit not just about the charity, but maybe tell them why. Why now? Why did you have this idea? Why was I smart enough to say yes to you doubling the purse and going to $1.5 winner's check?

TERRY DUFFY: You know, from my standpoint, I'm a big proponent of equality and I love giving everybody the opportunity to succeed in life. I think when I look at my own management team at CME Group. We are the large exchange in the world and we're basically a new company but 170 years old. I took the company public back in '02 and we've had great success; made a lot of changes.

One of the things I look at with my management team, I have a very balanced management team between women and men. I think it's best generated from those ideas, and I make sure there is equal pay for equal jobs. So I'm very much in favor of that. When I got involved with the LPGA many years ago working with I think forgot the ladies name that was before you.

MIKE WHAN: Not important.

TERRY DUFFY: Carolyn. We just worked a little bit. Had a small pro am of 20 players that I would bring them to the Ritz and we would have a little Pro Am. That led into having conversations with Mike about getting a tour event, which kind of did all little walk before we did a run.

Then I just decided we needed to up it a little bit, and then we came up with the idea as Mike referenced of the Race to the Globe, which I thought was a brilliant idea. It's been quite successful from CME's perspective, and hopefully for the LPGA as well.

When we joined the LPGA I think you had 17 and 18 events on the card? 20 maybe?

MIKE WHAN: I blocked that out of my memory.

TERRY DUFFY: Mike has done an amazing job of growing the sport, and I really like that. Mike had an opportunity to grow it during you know, I lived through the financial crisis; I lived through the '87 crash; I've seen the ups and down of markets. When you have a leader that has a vision when everybody else is looking for a way out, I want to be a part of that.

That's what I liked about Mike Whan and his vision. We went into the Race to the CME Globe, as Mike said. Now I said to my team, you know, we sponsor a whole host of different activities. I want to consolidate and I want to get more into the women's golf. We're going to take the money and add to it, but I want to make it a little bit more dramatic.

Mike outlined it. I said, What's the highest price on the LPGA? He says, U.S. Open at $5 million. I said, well, I can go $5 million 250; I can go $5 million 5. I can do whatever you want. Just not going to chase it. I don't want to get into a game.

What I want to do is get others thinking that the purses hopefully will go up. The economy has been going really well for sure a lot of people. The growth of the LPGA has up exponentially even compared I think to the regular tour, the PGA Tour.

So in my opinion, why not have other corporations? I want to be a leader. From our standpoint, that's what CME we've done our entire career, so we're a leader and we want to be a little bit of a trailblazer. I said I want to take the prize money and cut the field 60 and pay a million and a half to the winner.

I thought that was much more interesting event for the year long. As Mike referenced, historically we've done charity recipients have been the Wounded Warrior project and Bright Pink. As you all know, breast cancer, and then obviously the project for Wounded Warriors, two unbelievable organizations that do great work.

We are not going to stop supporting those organizations, but we're going to take them out of the golf part of the equation and just going to keep our corporate civic obligations with those two organization.

What's exciting is I got a very young population of workers at CME Group. Average age is around 43. Very highly skilled professionals at the exchange. So they have a lot of young children. I have young children. Even though I'm 60 years old I have 15 year old twins.

I think the most heartbreaking thing in the world is to see a child that's sick. It's just unbelievable. Everybody has seen it and it breaks your heart. So I said to my team, I want to change the charity to St. Jude's. The mission statement alone will make you want to be a part of St. Jude's. So I was very much taken all the years I can remember as a kid watching Danny Thomas do commercials about St. Jude, and now his daughter Marlow Thomas doing things. Obviously Jennifer Anniston and other celebrities, but that's not the story. The story is the work St. Jude's does.

So I decided I wanted to create an event that could help St. Jude's in any small way at all. It's important to me. So that's what we're doing. The St. Jude folks are here. We're going to have a little fun tonight with another friend of mine from how embargoed is this?

MIKE WHAN: You can tell them.

THE MODERATOR: You can tell.

TERRY DUFFY: So my buddy, Mark Wahlberg is going to be showing up tonight to do a little something to announce to all my participants about St. Jude's. Going to have a little fun tomorrow with Mark out on the golf course to raise additional funds for St. Jude's tomorrow morning. We're going to contribute before we start. You'll have money coming in as soon as tomorrow from CME Group.

So it will be a really exciting time. We're thrilled about it. Again, I can't say enough about what Mike and the tour has been able to do. It's a part of the fabric of CME right now and it works out well for us. Thank you.

MIKE WHAN: Tell them how the LPGA can impact your donation level to St. Jude's.

TERRY DUFFY: Yeah, so what we're going to do is for every hole in one on the LPGA Tour throughout the year, CME will donate $20,000 to St. Jude's Hospitals. You know, we have a tendency to make sure we always top up. Even if the wonderful players of the LPGA leave a few on the lip we'll make sure we kick a few in for them.

We'll make sure that the donation numbers are going to be really good ones.

MIKE WHAN: You meant hypothetically kick them in, right? (Laughter.) It's funny. In Terry and I's conversation, he made a comment that I think some of you have probably made to me or each other. When we are sitting there the CME Group Tour Championship, you have two IT people in a closet telling us if she makes this putt what it could mean. While you get it and the person in the closet gets it, the rest of the fans at home have no idea that somebody at 17th place is one putt away from winning the Race to the CME Globe.

Can't we just get the best players in the world to come here on Thursday and whoever wins, wins? I think a lot of tours and a lot of other sports have dealt with the whole how much math do you need right to the end. So I think this is very fan friendly.

Terry's point, we'll use the points. You have to be consistent to make it to this event. You can't have a win and go home and say, See you in Naples. So we're still going to have a season long race to get into this event. But once you got into this event the points are thrown out. Everybody understands who is 11 under and who is 9 under.

You know, a million five up for grabs. The second place check at this event will be larger than almost every winner's check on the rest of the tour events.

So this is going to be a pretty special moment for some of the best female golfers in the world.

TERRY DUFFY: What's really exciting too is CME Group is a very global company. We have a lot of business coming from outside the U.S.. Asia is a huge part of my company.

Once of the things someone asked me, Do you think this will hurt some of the Asian events? I said, This is going to bolster the last three events in Asia, because if you're sitting there at No. 100, you want to figure out how to get to be No. 60 by participating in these events knowing there is a million five a week later.

So you'll take the jet lag and play hard at these last couple events. So I think it's really going to help bolster some the other events.

MIKE WHAN: Same logic if you're 57. You're not going to be real comfortable at home.

TERRY DUFFY: No.

MIKE WHAN: Does make the final swing good. We've got a quick video that will show when at the send this out on the 9:00.

(Video shown.) []

THE MODERATOR: Questions. Raise your hand and we'll get this party started. Who wants to jump on in?

Q. Is this a reaction to sort of what the PGA Tour was doing? They wanted to take math out of the equation at the end, or did you guys sort of have this idea a little earlier?
MIKE WHAN: Certainly not a reaction to the PGA Tour but I don't think it's a surprising that they had a similar math discussions that we were having and Terry felt we talked about it last year in his box. We all knew what we were rooting for, but we really didn't know what was happening in 1, 2, 3 on the Race to the Globe, so I kept calling down to lawyer researcher who was sitting inside the hotel. I imagine it stemmed from the same premise, and obviously we went at it in terms of a solution a different way. Both are probably going to make it much easier not only for the fans and the media, but the players themselves. I think at the end of the day, any player can look at the leaderboard at any time and know where she stands, because that's what she's done the 33 weeks before that. Makes it pretty simple. Also just makes it pretty significant.

TERRY DUFFY: From my standpoint, I wanted anybody that made my event to win it, and so originally when we came up with the Race to the Globe I think it was only the Top 5 that could actually win the bonus; then we extended it to top 12 or 11 12. I thought, I want anybody to be able to win this. That's what really makes it exciting for the fans, makes it exciting for the charities, makes it exciting for Southwest Florida.

That's why I want it on national TV. Anybody that's worked so hard throughout the year you think about the top 60 in the world. That's strong. Why should 60 not have a chance to win?

That's the way I look at it.

Q. This event did come out of the depths of the great recession. Mike, could you talk a little bit what CME Group and this tournament has made in terms of elevating the profile of women's golf?
MIKE WHAN: You know, not I'll get to your question, but as Terry was talking about, in the process I was thinking when I took this job, I accepted the job in the fall of 2009 and asked to not start until January 2010. In 2009 I went to my only LPGA event where I was not known for a while. I walked in and it was the Houston TOUR Championship. It was a $1.3 million dollar purse; had 130 players in it; it was untitled. I remember asking some of those questions. Who is the title here? Well, we don't really have a title. I said, 130, that's a pretty big field for the tour. Well, it's really just a (indiscernible) field event. I'm thinking, as you were talking about it, that was Houston 2009. To sit here and talk about $5 million, $1.5 million, and not to mention that my room is at the Ritz nothing against Houston, but pretty impressive week all in all.

Yeah, at the end the day I've said this many times: If you look back to the growth of the LPGA over the last nine or ten years, there is a handful of heros that really lifted us up and made it important to them. I'm sitting next to one of them. I've celebrated him at the Rolex Ranking award dinner. We'll celebrate another one in a couple of nights.

But it's really been five or six people. If you think about your own careers, I mean, my own career is like that. There have been five or six people that saw something that I didn't see. Terry has seen something. He was being nice to you guys. When I called him the first time and told him I had this great idea, it was called the Gold Rush because they sell commodities. I thought that would be really cool. He was like, Gold Rush? Are you kidding me? He called me back and said, I got it. Race to the CME Globe.

So I had a terrible marketing idea but maybe a thread of a good idea.

TERRY DUFFY: So Mike really needs to understand a little bit more about what sponsors do. We don't sell commodities; we trade derivatives, which happen to be commodities.

MIKE WHAN: I can't spell derivative. The bottom like you meet somebody who's got a vision bigger than you my father always used to say, When you meet with a bigger dream than you, latch on to theirs. Even if they fall short of their dream, it might just land you on your dream. Terry has been a great example of that.

Like I said, he's always he's the only sponsor I know that called me and said, I think it's time we set a higher mark for women in women's golf. Of course I'm thinking that about all the week, but you can't make a phone called and say, You know what? I am going to drive in today. I was thinking you should set a higher mark for women's golf.

But to have somebody call you and say that, as I've said many times, you can't call that person a sponsor. Sponsors write checks. That's somebody that's going to make a difference for women. Not just women's golf. This is going to matter to young women when they see somebody walk off that green with a $1.5 million check.

My kids see men walk off greens with $1.5 million dollar checks almost every week. You never see a woman walk off the green with that. This is a game changer in terms of as Condoleeza Rice said to us at KPMG, they got to see it to be it. Terry is gonna let a few women see it.

Q. One quick follow up. Terry, what's this relationship mean to you?
TERRY DUFFY: Means a lot. I think Mike summed up a lot that about it means more to me than just the event. It means more to me about the future of our country. I get very concerned about young people and the direction they're going.

So anything you can do to help structure their lives in a better way, especially the ones that are healthy and not unfortunately the ones that are at St. Jude's that we have to you think about them. Young healthy women, you want them to have some kind of structure.

I think it's an obligation not only I as a CEO of a large institution, but others have that same obligation morally to do the right thing for young people. If you don't get the young people at a certain age they get to a certain time in their life and they're lost. It's unfortunate, but that's just the reality of it.

So I want to set an example where young girls can see this, and to Mike's point, have aspirations to be a part of it. That's how I look at it. It's bigger than the golf for me.

Q. It either of you, have you thought with the $1.5 million you're now in lock step in a sense with the big boys, the PGA Tour? Has that thought entered your mind?
TERRY DUFFY: It has definitely entered my mind, to be honest with you. I wanted to do it for the reasons I outlined for the gentlemen's question because I want to have an impact on young people, but at the same I do believe in equality. There is obviously a market that you can pay and you there is a market that you can' pay.

I felt I could push it. I wanted to know what the highest price was on the tour, and it's the U.S. Open at $5 million, and I wanted to be every part of that. And I'm not trying to shame anybody else into going higher. That's not my goal.

My goal is to do two things: One, to try to equate equality, because we have been blessed at our company to do the right things. Two, set an example for young women. Three, yes, I like the fact that CME is a thought leader in bringing the women's game forward.

MIKE WHAN: I like your headline, I won't lie to you. We're not there yet, but Terry is taking one humongous leap in that direction. This event will feel like that. We've got 33 or 34 others to be able to feel comfortable with saying, how do you feel about being on the same par? I know we're not and you know we're not, but I also know to get there it's going to take some people that really kind of change the high watermark.

Terry just moved the stick. It's a game changing moment for the LPGA.

Q. Follow up on that. You just said you're a derivatives trader. How much of this is business? How much is having your brand be a leader and how much is that moral component you're talking about?
TERRY DUFFY: Interesting question. I'll give you some statistics because I am a math geek from all my years of trading products before I became chairman and CEO.

Brand value is critically important. So the brand value of CME is measured by outside agencies. New York Stock Exchange's brand value is $1.5 billion. Now, you think you come off the crisis of '08, you can imagine our brand value is nowhere near that. We had many some other issues in the business, your brand value goes down.

I was sitting around one night in one of my insomniac nights, and this is when Steve Jobs was still alive and Charlie Rose was holding a roundtable with Steve Jobs, Larry Ellis, and Warren Buffett, and one other individual. I forgot who it was.

The final question in the wrap up was: What is the single most important thing to your company? What can you not afford to have happen? Reputational harm was the answer each and every one of them said. Reputational harm is something that's really hard to get back.

So I was concerned about the '08 crisis. To answer your question, brand is a big part of this to my company and it's being associated with a good brand and rebuilding, so has a lot of brand value from that perspective as well. From a business side, yes, sir, it does have value. And that's how we measure it.

Q. Mike, you mentioned here and spoke before about wanting greater financial opportunities for your players. (Indiscernible), but endorsement opportunities. How do you hope this filters down into other events and opportunities?
MIKE WHAN: Well, the reality is I remember talking to my players the very first player meeting in 2010, and they were talk higher purses. I said, guys, higher purses don't come because I make more phone calls or make more trips. Higher purses come when we build out a schedule, and then there is competition to have the best field at each event.

People pay what they want to pay to have the best possibly proposition. When we were playing 22 times a year, probably didn't matter what your purse was. You were going to get that kind of field strength. Now for the last four or five years we've built out and we're at the schedule we've pretty much been at and we really don't want to be at anymore events. It's where you've actually seen the most I mean, I think last year we had a third of our events take some sort of purse increase.

So I think I might have told you this. Flying back from Asia last year just looking at the LPGA stats and just seeing how many women made a million bucks our more, right? My first year we had two, and I thin last year we had 17 or 18. I was all excited about that until of course I Googled PGA Tour millionaires and thought, okay, we got to a little bit of room to go. I think they had 98.

But the reality of it is if you're one of the best 60, 50, 120, anythings in the world in your sport at a level that's televised around the world, you shouldn't need a rich uncle to help you cover travel expenses for the year. This is an opportunity to say that financially, if I can make it to Naples and play good golf, I'm pretty secure financially not just for this year, but for next. It's just unique opportunity.

There is no doubt in my mind that Terry's move will impact others. Why? Because I'll give you the schedule in a couple weeks and you'll see. Now, a lot of those guys don't know what Terry was doing and vice versa. I think the reality of it is he's not alone in his desire to continue to see the women's stake get moved forward as it relates to what we're playing for.

Q. Very similar to Randy's question. When Terry said he's not the looking to shame anybody into digging deeper. You're very familiar with how this process works. How common is it? Maybe it isn't shame, or maybe it is for lack of a better word a little bit of an ego when you see one company raising the bar this much. What's the likelihood that other companies are going to come to you and say, We have to do more, without you pressing them?
MIKE WHAN: I'll give you a little insight. I sat at a player meeting before. When we're talking about equal purses and what the men make and what the women make, it's not only wrong, it's almost shameful to talk about the current sponsors of the LPGA.

What you'd just essentially be saying is why aren't they paying us more? Without them we're not playing and no one has the camera in our face in the first place. You can talk a lot about playing for more and everything else, but to pick somebody on our tour and say, Why isn't your purse higher? That person had a lot of choices where they could invest their brand money. They chose women's golf and the LPGA.

That's a person that should never feel the wrath of the LPGA. We should do nothing but hug those people and say thank you for giving us this incredible opportunity to be televised all around the world and play a sport we love, compete at this level.

So not only do I not like the term shame others, I don't believe in it. I was a sponsor for 40 years before I was a commissioner. I get what it feels like to decide where you're going to write your checks and board critique of those things.

The reality is, and I've said this to Terry many times: CEOs don't become CEOs because they really like the status quo, and they don't like being the same CEO as the person that's sits down next to them. You become CEO because winning is important and because if you're going to do something you do it right.

That's why almost every CEO comes to this event and at some point looks at me and goes, What do we do it we want to make this a little better? It's in their genes. They can't help it. They want to get better. So when Terry says, This is the court I'm playing on, do I think some other sponsors will say, I like that court, I like that reaction, I like how the player are talking about CME? Of course they will. I certainly don't feel like anybody is going to move because of their shame. I wouldn't let them move for that reason because that reason won't last. If they want to do it makes it their event bigger and more powerful, greater media expectations, greater field, fantastic.

To do it because they felt like they had to do it, that's just a guy I'll never get to renew when the contract is over. That's just not worth it.

TERRY DUFFY: From my standpoint, that's why I used I don't want to shame anybody. I also am in a different situation. Certain sponsors might have a premier event associated with the LPGA. So do I.

I also have an NHL premier event, I have a premier event with franchises around the world. I'm consolidating, and that's why I was able to do it.

THE MODERATOR: Thank you gentlemen so much.

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