Judge William Maki in the Circuit Court of Cook
, Illinois, upheld CBOE’s challenge, banning the
New York-based options exchange from offering options linked to
the Standard & Poor’s 500 Index and the Dow
Jones Industrial Average.
He also forbade the Options Clearing Corporation to clear such
A spokesperson for ISE, owned by Deutsche
Börse’s Eurex, said:
"We believe this result is incorrect based on the facts and the
applicable law in this case, and we will proceed to appeal this
The OCC said it would abide by the ruling, Associated Press
The judge said:
"ISE is permanently restrained and enjoined from listing or
providing an exchange market for the trading of DJIA and/or
S&P 500 index options. The court finds that the trading of
index options on the Dow Jones Industrial Average and S&P
500 by ISE would misappropriate the index
providers’ rights in their indexes."
Bill Brodsky, CBOE chairman and CEO, was delighted with the
decision. "After nearly four years of defending our contractual
right to exclusively list and trade these index products, we
are elated that the time, energy and resources needed for
litigation may now be redirected to focus on new initiatives to
better serve our customers and benefit our shareholders,"
Brodsky said. "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."
The legal battle between the two leading US options exchanges
began in 2006 when ISE suid the CBOE to end its exclusive hold,
and the CBOE countersued ISE and the Options Clearing
CBOE claimed it had an exclusive licence to offer options
linked to the indices, but ISE said it could offer options
without a licence because the indices’ values were
in the public domain.
The CBOE was latterly joined in its action against the ISE and
the OCC by the
McGraw-Hill Companies, owner of the S&P indices, and CME
Group, which recently acquired Dow Jones Indexes.
CBOE’s battle to continue operating its exclusive
suite of index options has its roots in its dominance of its US
index options trading.
ISE never actually listed the two options, though it does have
other options linked to S&P and Dow Jones indices, such as
the S&P 400 Midcap Index, as well as exposure to the
S&P 500 through exchange-traded funds such as its options
on the iShares S&P 500 Index Fund.
CBOE’s continued leading market share in the US
options market relies partly on its dominance of the
This field accounted for just 7.8% of all options cleared by
the Options Clearing Corporation for the eight US equity
options exchanges in June. But CBOE has a 93% market share of
index/other options. ISE is the only serious competitor, with
That strength keeps CBOE’s market share of all
options at 29.3% in June, though Nasdaq OMX PHLX has been
catching up with it in single stock options, where their market
shares are 24.0% and 22.3%.
ISE is now third in both pure options and all options, with
market shares of 20.0% and 18.7%.
The S&P 500 is by far the most actively traded index
option, with 15.1m contracts cleared in June – 63% of
all the index/other options handled by the OCC. Those contracts
bore $37bn of premiums.
Colin Packham, Sydney firstname.lastname@example.org