By Jacob Bunge
The parent of the Chicago Board Options Exchange sued a smaller
rival over its use of electronic-trading functions, according to
court documents filed Monday.
CBOE Holdings Inc. (CBOE) is seeking $525 million in damages
from the International Securities Exchange, an all-electronic
stock-options market based in New York.
The dispute turns on systems that CBOE alleged are used by the
ISE designed to automatically adjust traders' prices offered to buy
or sell options contracts, which CBOE charged infringe upon CBOE's
own long-held patents.
Such a service, shielding traders from taking on overly risky
exposure, is an "essential feature" of electronic options markets
such as ISE, according to CBOE's lawsuit. Rival owners of options
exchanges, such as NYSE Euronext (NYX) and Nasdaq OMX Group Inc.
(NDAQ), weren't named in the complaint.
A spokeswoman for the ISE, owned by Germany's Deutsche Boerse AG
(DB1.XE, DBOEF), declined to comment.
The lawsuit was filed in the U.S. District Court for the
Northern District of Illinois.
Besides the $525 million in damages sought, CBOE in its
complaint asked for a judgment that would "treble" compensatory
damages, as well as legal fees.
The lawsuit adds to a raft of court cases entwining the CBOE,
owner of the oldest and busiest U.S. options exchange, and the ISE,
its all-electronic rival launched in 2000.
The exchanges have jousted for about six years over CBOE's
exclusive right to list heavily traded options on major
stock-market benchmarks such as the Standard & Poor's 500 stock
index. In late September, the Illinois Supreme Court declined to
consider ISE's appeal of a lower court's ruling that upheld the
CBOE's exclusive listing of the contracts.
On Nov. 2, an Illinois court blocked a separate effort by the
ISE to list contracts resembling CBOE's proprietary S&P index
options.
The ISE in 2010 sought $300 million or more in damages linked to
alleged CBOE infringement on its own technology patent. CBOE in
August of this year reopened a separate patent dispute with ISE,
seeking a court ruling that its all-electronic C2 exchange doesn't
infringe a patent on automated trading held by the ISE.
The latest CBOE lawsuit was earlier reported by Reuters. CBOE
shares settled down 1% at $29.69 Tuesday.
Write to Jacob Bunge at jacob.bunge@dowjones.com
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