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The purchase will be executed through a modified Dutch Auction process, with a price range of $60,000 to $100,000 for each "exercise right privilege," which is the transferable interest representing the CBOE exercise right component of a CBOT Full Membership. CBOT Full Members who choose to do so, may offer to sell their exercise right privilege for any price within that range. At the conclusion of the offer period, CBOE will determine the clearing price and the number of exercise right privileges it will purchase. All CBOT members tendering at or below the clearing price, whose exercise right privileges are purchased in the offer, will receive the same price for their exercise right privilege. CBOT members may also offer to sell at the clearing price without specifying an individual sale price. CBOE is not obligated to purchase any minimum number of exercise right privileges.
CBOE plans to mail the purchase offer materials to CBOT Full Members by Monday, September 20, and the auction process is expected to be completed by October 20, 2004.
"The exercise right impacts CBOE and CBOT in ways never contemplated when it was formed at CBOE's inception 31 years ago," said William J. Brodsky, CBOE Chairman and CEO. "Today's markets demand that we position our institutions to pursue separate strategic paths. We are pleased to initiate a purchase offer at a time when reducing the overall number of exercise rights represents an important step toward increasing the autonomy and agility of each exchange."
"This vote opens the door to opportunities for CBOE as well as CBOT members. The purchase of exercise rights from those who want to sell them is a step toward giving CBOE more certainty and control over the number of members on our floor, while giving CBOT members the opportunity to immediately unlock the value of the exercise right," said CBOE Vice Chairman Ed Tilly.
Since CBOE's inception in 1973, the exercise right has entitled each of the 1,402 Full Members of the Chicago Board of Trade to become members of CBOE without having to acquire a separate CBOE membership.
The CBOE membership approved the purchase offer initiative in a vote on April 19, 2004.
CBOE, the world's largest options marketplace and the creator of listed options, is regulated by the Securities and Exchange Commission (SEC). For additional information about the CBOE and its products, visit the CBOE website at: http://www.cboe.com/.
