ISE loses appeal; index exclusivity holds

May 25, 2012 09:27 AM


The Chicago Board Options Exchange (CBOE) and The McGraw-Hill Companies, Inc. (McGraw-Hill) today announced that the Illinois Appellate Court has ruled in favor of CBOE, McGraw-Hill and CME Group Index Services, LLC regarding the index options litigation brought against the International Securities Exchange, LLC (ISE).

Today's ruling affirms an injunction that prohibits ISE from listing or offering a market for trading in options on either the S&P 500® Index (S&P 500) or the Dow Jones Industrial AverageSM (DJIA), as to which CBOE holds exclusive licenses.  The injunction also forbids The Options Clearing Corporation (OCC), which clears trading for all U.S. options exchanges, from clearing options on these indexes unless they are traded pursuant to CBOE's exclusive licenses.

"We are obviously gratified that the Court has ruled in CBOE's favor," said CBOE Chairman and CEO William J. Brodsky. "No third party should be able to interfere with contractual licensing agreements. Nor should any exchange have a free ride on the enormous investment CBOE made in creating options on these indexes and in developing and marketing them for over two decades. A thriving options marketplace was built upon innovation, and we will continue to vigorously defend the incentives that make innovation possible."

“The licensing of our intellectual property rights has given rise to an explosion of innovation in indices and index product creation, both of which have served the financial markets and global investors well,” said Alexander Matturri, Executive Managing Director at S&P Indices. “We are extremely pleased that the Appellate Court has affirmed the lower Court’s recognition of S&P Indices’ intellectual property rights – a cornerstone of creativity and growth in our markets.”

On November 15, 2006, CBOE and McGraw-Hill filed a lawsuit in Cook County, Illinois, against ISE and the OCC to prevent ISE from listing or offering a market for trading in options based on the S&P 500 or DJIA and to prevent OCC from unauthorized clearing of those trades. CBOE and McGraw-Hill (and McGraw-Hill's subsidiary Standard & Poor's Financial Services LLC) were joined in the lawsuit by Dow Jones & Company, Inc. (now CME Group Index Services, LLC).  On July 8, 2010, the Circuit Court of Cook County entered the injunction against ISE and OCC, and the appeal followed.


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