"We are gratified by the Commission's decision and pleased to have the purchase offer back on track," said William J. Brodsky, CBOE Chairman and CEO. "The exercise right has been embedded in the CBOT membership for 32 years, and the purchase offer represents CBOE's first opportunity to begin to buy back any portion of those rights. This is of particular importance today, when the market demands that our institutions be unencumbered in the pursuit of separate strategic paths. The ability to reduce the overall number of exercise rights represents an important step toward increasing the autonomy and agility of each exchange."
"The SEC's decision re-opens the door to an important opportunity for CBOE as well as CBOT members. The ability to purchase exercise rights from CBOT members who want to sell them increases CBOE's ability to control the number of members on our floor, while giving CBOT members the ability to immediately unlock the value of the exercise right," said CBOE Vice Chairman Edward T. Tilly.
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 a 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's offer to purchase exercise rights is expected to begin on or about April 26, CBOE's 32nd anniversary, and will expire 30 days later unless extended by CBOE. The terms of the offer will be set forth in written materials that will be sent to every CBOT Full Member.
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/.
