From the March 01, 2008 issue of Futures Magazine • Subscribe!

SEC rules on ERPs

In January, the Securities and Exchange Commission (SEC) ruled in favor of the Chicago Board Options Exchange (CBOE) in its plea to eliminate former Chicago Board of Trade (CBOT) members’ CBOE exercise rights, clearing a big hurdle for the demutualization of CBOE.

In August 2007, the Delaware court granted CBOE’s request for a suspension pending the SEC decision on whether anyone could qualify as a member of CBOT for purposes of the exercise rights following the CBOT/CME merger in July 2007. CBOE CEO William Brodsky called the latest SEC ruling the next-to-last stop in CBOE’s demutualization process. The fight will now move back to the Delaware court.

Both CBOE and CME claimed victory after the ruling. In a statement, CME Group said “We are pleased that the SEC agrees with CME Group that the merits of our claims reside in the Delaware courts. The ruling clearly emphasizes that the state court’s decision takes precedent in preserving the exercise and property rights of CBOT members.” In a statement, Brodsky said “CBOE applauds the commission for addressing the exercise right issues with certainty, clarity, and specificity.”

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