The Executive committee of the Chicago Board Options Exchange (CBOE) has suspended all purchase and sale transactions in transferable CBOE memberships as of 7:00 am CDT this morning. According to a circular sent out to CBOE members the halt was announced, “in order to allow for the possible dissemination of information regarding these matters.”
The circular went on to say, “The Executive Committee declared the suspension pursuant to CBOE Rule 3.14.01 in the interest of maintaining a fair and orderly market in transferable CBOE memberships.”
While no further explanation was included, one possible reason for such a suspension could be progress towards a settlement with Chicago Board of Trade (CBOT) members over the lawsuit involving exercise right privileges (ERPs). CBOT members sued CBOE for equity in CBOE after CBOE eliminated the ERPs. CME Group, as part of the merger agreement with CBOT, has pledged to support this litigation. Later this morning, a CME Group spokesperson confirmed that sales in CBOT full memberships and ERPs were also suspended.
Merger and acquisition activity along with other factors could also cause a halt though most experts believe that the exercise right issue has to be worked out before the CBOE can move forward with their demutialization plans, let alone more complex deals.
An attorney familiar with the industry says that when there is a halt on seat transactions it usually precedes an announcement that could affect the value of seats. “They don’t want anyone to have an advantage or disadvantage. History says there will be an announcement [that will involve the value of memberships],” says the attorney.
