CBOE Wins SPX, DJX Options Case

July 14, 2010

The Chicago Board Options Exchange, the largest U.S. options exchange, won a legal battle against New York-based International Securities Exchange (ISE) that ensures the CBOE remains the only exchange in the country to offer options contracts on the S&P 500 (SPX) and the Dow Jones Industrials Average (DJX) indexes.

The CBOE filed a lawsuit in Illinois against the ISE and the Options Clearing Corporation (OCC) nearly four years ago seeking to stop both the ISE from listing or offering a market for trading options linked to those indexes and the OCC from clearing those trades.

The ruling, issued by the Circuit Court of Cook County this month, did just that when it determined that the CBOE holds an exclusive license to list and trade options on the S&P 500 and the DJIA indexes.

The court also said that the OCC, which clears trades done on all U.S. options exchanges, may not clear trades of options on SPX and DJX unless those trades occur under the CBOE’s license.

“We believe this result is incorrect based on the facts and the applicable law in this case, and we will proceed to appeal this decision,” Molly McGregor, ISE’s director of corporate affairs, told IndexUniverse.com. She didn’t elaborate on the timeline for an appeal.

The legal wrangle began in 2006 with ISE first filing a complaint in a New York District Court seeking to end the CBOE’s exclusive hold of certain index options. ISE was looking for the court to issue a declaratory judgment exempting it from needing a license to list SPX and DJX options, McGregor said.

“We never actually listed them or traded them,” she added. “But we were looking for the judge to make a determination that we could.”


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