The Board of Directors of the Chicago Board Options Exchange (CBOE) announced today that the Exchange submitted a rule filing with the Securities and Exchange Commission (SEC) declaring that upon completion of the proposed acquisition of the Chicago Board of Trade (CBOT) by CME Holdings the CBOE exercise right will be terminated.
The exercise right, which gives full CBOT members the right to become and remain CBOE members without having to purchase a CBOE membership, was granted to CBOT members under CBOE's corporate charter in 1973. Having reviewed the impact of the announced acquisition of CBOT on the exercise right, the CBOE Board declared that CBOT would no longer have "members" as defined by the charter provision that created the exercise right. In light of these changed circumstances, CBOE today submitted a rule filing that seeks Securities and Exchange Commission approval that, upon completion of CME Holdings' acquisition of CBOT, CBOT members no longer would qualify to become or remain members of the CBOE through the exercise right.
"The proposed acquisition of CBOT by CME clearly and fundamentally changes the meaning of a "CBOT member" as defined by the charter provision that created the exercise right," said William J. Brodsky, CBOE Chairman and CEO. "As a result, the Board took this action so that CBOE may continue to move ahead with its own demutualization in light of these significantly changed circumstances."
In a related development, the Board announced that its Special Committee of Independent Directors has determined to suspend its work related to CBOE's planned demutualization. The Special Committee was created by CBOE to determine how membership interests -- held both by those who purchased CBOE memberships and by those who obtained their memberships through the exercise right -- would be treated in a demutualized CBOE. The Special Committee decided that it was not now necessary to ascribe a value to those interests because of the Board's decree that the acquisition of CBOT will eliminate this group of membership interests.
CBOE plans to move forward with filing a Form S-4 Registration Statement concerning its proposed demutualization and expects to consider the timing of that filing at the January 2007 meeting of its Board of Directors.
CBOE, the largest options marketplace in the U.S. 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: www.cboe.com.
