CBOE Halts Seat Transactions After Settling Legal Dispute
By Jacob Bunge, Of DOW JONES NEWSWIRES
CHICAGO -(Dow Jones)- The Chicago Board Options Exchange halted sales of seats
on the exchange early Tuesday, after announcing the settlement of a long-running
legal dispute over its ownership.
The CBOE, the largest options market by volume and among the last major
exchanges still held by members, said late Monday that it would pay $4.2 million
to settle appeals in a case over ownership rights to the exchange, paving the
way for a merger or an initial public offering in the coming weeks.
Buying and selling of seats, which carry membership rights on the CBOE, would
resume at 10 a.m. CST, according to a notice from exchange officials.
Ending the four-year legal battle means that the CBOE is likely to field
offers from other exchange operators; Chicago-based derivatives giant CME Group
Inc. (CME) has been seen as a likely bidder, along with transatlantic exchange
operator NYSE Euronext (NYX), which already operates two options markets.
Less likely candidates are Frankfurt's Deutsche Boerse AG (DB1.XE), which
already owns the second-largest U.S. options platform in the International
Securities Exchange, and Nasdaq OMX Group Inc. (NDAQ), which saw Moody's upgrade
its credit rating to Baa3 from junk status earlier this month.
CBOE Chief Executive William Brodsky, who has shepherded the exchange through
the run-up to demutualization, has indicated he would prefer to let the public
markets set a price for the exchange prior to any merger agreement.
Prior to Tuesday morning's halt in seat transactions, the most recent seat
sold for $2.75 million on Nov. 5, roughly setting the CBOE's value at about $2.6
billion.
The two most recent seats were purchased by Bruce V. Rauner, principal and
chairman of Chicago-based private equity firm GTCR Golder Rauner LLC.
The CBOE has been progressing toward demutualization since early 2006, and the
dispute over its ownership has seen it miss the rise and subsequent slide in
exchange valuations.
Members and stakeholders of the Chicago Board of Trade, which created the CBOE
in 1973, claimed they were entitled to equity in a demutualized CBOE, an
argument the CBOE rejected until agreeing in 2008 to a settlement that would
give the CBOT members an 18% equity stake and $300 million in cash.
That settlement was challenged earlier this year by parties who disagreed over
the division of cash and equity in a demutualized CBOE, and the dispute moved to
the Delaware Supreme Court in October.
In a notice to members, the CBOE said that although exchange officials
believed the appeals would have been unsuccessful, settling the long-running
case was "in the best interest of CBOE and its seat owners because settlement of
the appeals would eliminate all remaining litigation impediments to
demutalization within days or weeks instead of months, and would avoid further
expenses related to the appeals."
-By Jacob Bunge, Dow Jones Newswires; 312-750-4117; jacob.bunge@dowjones.com
By Jacob Bunge Of DOW JONES NEWSWIRESCHICAGO -(Dow Jones)- Business Wire Inc. is challenging a move by Nasdaq OMX
Group Inc. (NDAQ) to bundle free wire-distribution services with stock listings
at the exchange, alleging that the practice is anti-competitive. In a letter to the Securities and Exchange Commission, Business Wire called on
regulators to block an increase in listings fees proposed by Nasdaq OMX,
alleging that the higher rates are intended to subsidize free information-
distribution services offered by Nasdaq OMX subsidiaries like GlobeNewswire. "Customers for listing services, while having the nominal right to choose
their own provider of Information Dissemination Services, will inevitably treat
Nasdaq's listing service and its 'free' Information Dissemination Services as a
single unit and direct their wire distribution business to GlobeNewswire since
they are already incurring the cost," attorneys for Business Wire wrote in the
letter, a copy of which was seen by Dow Jones Newswires. Representatives of Nasdaq OMX declined comment on the letter. Business Wire, a unit of Berkshire Hathaway (BRKA), distributes press
releases, regulatory filings and other information and dominates the U.S. market
for such services alongside PR Newswire, a subsidiary of United Business Media
Ltd (UBM.LN). Nasdaq OMX's GlobeNewswire service, previously known as PrimeNewswire, was
acquired by Nasdaq in 2006 and controls a relatively smaller portion of the
market, estimated at 5% to 10%. The maximum price for listing on Nasdaq is currently $95,000, though this is
expected to rise to $99,500 in 2010, according to Nasdaq OMX's proposal.
-By Jacob Bunge, Dow Jones Newswires; (312) 750 4117; jacob.bunge@dowjones.com
(END) Dow Jones Newswires
12-01-091011ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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