The Chicago Board Options Exchange (CBOE) announced in an information circular sent to members Wednesday that it has reached a definitive agreement to settle the Exercise Rights litigation with Chicago Board of Trade members.
The agreement must be approved by the Delaware Court and a CBOE membership vote, which is set for Sept. 17.
An agreement in principal over resolution of litigation involving Exercise Right Privileges (ERPs) held by CBOT members to trade on CBOE that were extinguished based on a Securities and Exchange Commission rule interpretation had been reached earlier this summer but a vote was postponed.
Trading of full CBOT memberships, with and without the ERP, as well as trading of the ERP itself has been suspended according to the CME Group Website.
Below is the text of the circular:
To: CBOE Membership
From: Office of the Chairman
Date: August 20, 2008
Re: Summary of the Terms of the Settlement of Exercise Right Litigation
We are pleased to announce that a definitive agreement has been reached to settle the Exercise Right litigation and that a membership vote will be held on Wednesday, September 17, 2008 on whether to approve the settlement. In order to inform you more fully about the terms of the settlement and to answer any questions you may have, an informational membership meeting will be held in the Members’ Lounge at 9:00 a.m., Friday, August 22, 2008. In preparation for that meeting, we are providing this summary of the key settlement terms. A copy of the complete Stipulation of Settlement also will be available on the CBOE website today.
The summary addresses the terms that management believes will be of primary interest to CBOE members and includes references to the relevant paragraphs of the Stipulation of Settlement. It does not address every term of the Stipulation and you are encouraged to carefully review that entire document when it becomes available.
Please note that the settlement will be effective only after it has been approved by a majority vote of a quorum of CBOE voting members and after it has been finally approved by the Delaware Court, including any appeals. If the settlement is not approved, it will be rendered null and void, and the parties will be returned to their litigation positions as they existed prior to the execution of the Stipulation.
Your Board of Directors and CBOE management believe that the proposed settlement represents a reasonable way to settle both the Delaware Exercise Right litigation and the pending appeal of the SEC’s Order approving CBOE’s interpretation of the effect of CME’s acquisition of the Board of Trade on Exercise Right eligibility. The Board and management further believe that proceeding with the settlement is in the best interest of CBOE and its seat owners. It avoids the uncertainty, expense and distraction of continued litigation and gives the Exchange control over the timing of its demutualization and other strategic options. Therefore, we urge you vote to approve the settlement on September 17, 2008.
We are very pleased to have completed these settlement discussions. We are committed to having a fully informed membership and will have as many informational meetings as necessary for this purpose. In addition, please feel free to e-mail us with any questions or comments.
Chairman and Chief Executive Officer Bill Brodsky
Vice Chairman Brad Griffith
Executive Vice Chairman Ed Tilly
President and Chief Operating Officer Ed Joyce
