CBOE Sees No Threat From A S&P-Dow Jones Index Deal

CHICAGO (Dow Jones) -- The parent of the Chicago Board Options Exchange said Wednesday its long-running license to trade options on the Standard & Poor's 500 stock index would not be threatened by a potential deal combining the index with the Dow Jones Industrial Average.

Such a deal, reported last week by The Wall Street Journal to be under discussion, could give Dow Jones Indexes owner CME Group Inc. (CME) more sway over how the S&P indexes are used in derivatives trading. CBOE shares fell on the news.

CME and McGraw-Hill Cos. (MHP), which owns Standard & Poor's, have declined to comment on any deal talks.

"This would have no immediate effect on our license," said Richard DuFour, head of corporate planning and development for CBOE Holdings Inc. (CBOE), speaking at an investor presentation Wednesday. "Our license provides for any change of control."

CBOE's license to exclusively trade options on the S&P 500 is critical to the company, which went public last year. Contracts linked to the index's value make up its most heavily traded market, and this week CBOE launched a long-awaited electronic version of the options on its new venue for automated trading, called C2.

The license gives CBOE exclusive rights to trade the popular contracts through 2018.

DuFour said Wednesday that he saw "nothing but positives" should CME and McGraw hill agree to an index deal, which people familiar with the matter have said could give CME a 25% stake in a new joint venture that McGraw-Hill would manage.

"The CME understands as well as we do the synergies between our products and theirs," said DuFour. Chicago-based CME's most heavily traded stock-index futures are based on the S&P 500 index, and DuFour said the same banks and firms trade heavily in both derivatives markets.

"There's no particular advantage to be gained in splitting up the liquidity," said Dufour.

News Corp.'s (NWS) Dow Jones & Co., publisher of The Wall Street Journal and this newswire, is a minority partner in Dow Jones Indexes.

-By Jacob Bunge, Dow Jones Newswires; 312-750-4117; jacob.bunge@dowjones.com

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