From the October 01, 2007 issue of Futures Magazine • Subscribe!

CME buys CBOE ERPs

The CME Group will pay $39.75 million to members of the Chicago Board of Trade (CBOT) for 159 exercise right privileges (ERP) on the Chicago Board Options Exchange (CBOE).

The remaining 668 CBOT members holding ERPs retain the right to a guaranteed $250,000 minimum payment from the CME Group should they lose a court battle to convert those ERPs into equity shares on the CBOE.

“We remain confident that CME Group will prevail in obtaining a favorable outcome, whether through litigation or settlement, in receiving full participation in a CBOE demutualization,” said CME CEO Craig Donohue. “As the largest ERP holder, CME Group now has a significant economic interest in vigorously pursuing the litigation to maximize the recovery from the [CBOE].”

In December, the CBOE filed a rules change with the SEC that would invalidate those ERPs, and a Delaware judge is waiting for the SEC decision before proceeding with a lawsuit that could determine whether ERP holders are entitled to equity in the CBOE.

In other integration news, the CME announced that pork belly futures and options will trade exclusively on the Globex electronic platform when the CME Group trading floor is consolidated. It also announced that the major currency future contracts will be combined in one pit with less liquid contracts moving to Globex.

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