CBOE to launch separate options exchange
Reuters, Tuesday October 21 2008
* CBOE says to launch all electronic options market
* CBOE says expects to spend about $25 mln on exchange
* CBOE says Q3 net income up 56 pct
* CBOE says Q3 revenue rises 24 pct to $120.1 million (Adds details throughout)
CHICAGO, Oct 21 (Reuters) - The Chicago Board Options Exchange said on Tuesday it plans to launch a new and separate options electronic platform that would incorporate a different model to attract more liquidity and new types of customers.
The largest U.S. options market also said its third-quarter profit after taxes rose 56 percent because of a rise in trading volume and more products.
The CBOE, operating as a for-profit business for the past two years, has reported double-digit growth for 11 consecutive quarters.
Earnings after taxes for the third quarter rose to $35.4 million from $22.7 million a year earlier. Before taxes, quarterly profits were 60.7 million, compared with $41.2 million a year ago, the exchange said.
Fueled by higher trading volume, quarterly revenue grew 24 percent to $120.1 million from $96.8 million a year earlier.
Last month, CBOE members approved a legal settlement with CME Group Inc's Chicago Board of Trade members who were eligible to an ownership stake in CBOE, paving the way for the exchange to go public or merge with another exchange.
The settlement needs Delaware Chancery Court Approval.
Average daily volume at the CBOE during the third quarter was 5.3 million contracts, compared with 4.1 million contracts during the same period in 2007.
During the quarter CBOE introduced three new volatility benchmarks to its family of volatility products. It also began trading options on the CBOE S&P 500 BuyWrite Index .BXO>, which would allow flexibility in trading and managing risk in covered call portfolios and structured products. CBOE also started offering put binary options on the S&P 500 index .SPX>.
Quarterly expenses were $59.3 million compared with $55.6 million a year ago.
CBOE's quarterly operating margin was 50.6 percent, up 8.1 percentage points from a year ago.
Operating cash flow was $52.3 million for the third quarter of 2008 vs. $30.5 million for the 2007 third quarter.
CBOE said it used cash from operations mainly to fund systems improvements and its growth initiatives through capital expenditures of $17.1 million for the third quarter.
The higher level of capital spending was mainly due to development of initial systems requirements for CBOE's alternative exchange initiative, which was announced on Tuesday to members on CBOE's website.
The new exchange, referred to as "C2," is expected to be launched in 2009, pending U.S. regulatory approval.
CBOE said the capital investment for C2 is anticipated to be about $25 million, with the majority of the systems development and capital outlay occurring in 2008.
The exchange will compliment CBOE's hybrid platform and will eventually support the listing and trading of all CBOE products using multiple market models and pricing structures. It will operate under a separate license with a separate access structure and fee schedule, and have its own board, rules, connectivity and systems architecture.
Once complete, C2 would be a subsidiary of CBOE and would become a subsidiary of CBOE Holdings Inc, in the event of CBOE's demutualization to become a shareholder-owned company. (Reporting by Doris Frankel) |
