CBOE Ownership Dispute Seen Continuing Into 2010
03 Settembre 2009 - 10:11PM
Dow Jones News
The Chicago Board Options Exchange will be unable to seek a
strategic partner or a potential flotation until 2010 following the
latest legal setback to its four-year pursuit of
demutualization.
A long-running spat over the ownership of the largest U.S.
options exchange by volume has frustrated many stakeholders and
last week triggered fresh appeals against a planned resolution.
The member-owned exchange has been moving toward demutualization
since early 2006, and the ownership disputes have seen it miss the
sharp jump and subsequent slide in sector valuations.
A painstakingly crafted settlement involving members and
stakeholders from the Chicago Board of Trade, which created the
CBOE in 1973, is again contested by the appeals filed last
week.
The Delaware Supreme Court is set to receive opening briefs by
Oct. 12 concerning ownership rights. Oral arguments are expected in
December, with resolution seen sometime in mid-2010.
William Brodsky, CBOE's chairman and chief executive who has
often stated his preference for an IPO, said that the exchange was
reviewing the appeals and declined further comment.
The Chicago Board of Trade members claim they are entitled to
equity in a demutualized CBOE, an argument the CBOE initially
rejected until agreeing in 2008 to a settlement that would give the
CBOT members an 18% equity stake and $300 million in cash.
Now the disagreements hinge on how the settlement is divvied
up.
Most of the seven appeals filed Aug. 28 seek inclusion in the
settlement's class A, which will split the equity stake and
remaining cash after class B participants are paid $250,000
each.
However, at least one appeal seems to question the fairness of
the settlement, a more thorny legal issue that could take longer to
resolve, according to persons familiar with the matter.
The CBOE has continued to grow as its future is considered by
various Delaware courts. Last year was the exchange's busiest on
record, and last month saw an average 4.4 million contracts change
hands each day, making it the most active August ever at the
CBOE.
The exchange, situated in the heart of Chicago's financial
district, commands more than 90% of the index options trade in the
U.S. It's also home to the oft-quoted CBOE Volatility Index, or
VIX, known as the market's "fear gauge."
The CBOE's continued dominance of the fast-growing options
sector has made it a prime candidate for M&A speculation,
though Brodsky has stated his preference for an IPO before
entertaining other deals.
Transatlantic exchange operator NYSE Euronext (NYX), which
already maintains two options platforms, is seen as one potential
acquirer. Another is Germany's Deutsche Boerse (DB1.XE), which
bought the CBOE's chief rival, the New York-based International
Securities Exchange, in 2007.
CME also has been considered a candidate, though the
Chicago-based derivatives giant's resistance to regulation by the
Securities and Exchange Commission is seen as a major barrier.
Though the CBOE doesn't have a publicly listed stock, its value
has suffered in the financial turmoil. While a seat at the CBOE
fetched $3.1 million in early 2008, the most recent sale, at $1.8
million, valued the 930-member exchange at about $1.67 billion.
-By Jacob Bunge, Dow Jones Newswires; (312)-750-4117;
jacob.bunge@dowjones.com