International Securities Exchange Loses Appeal in Lawsuit

International Securities Exchange LLC lost its appeal of a court order barring it from providing a forum for the trading of S&P 500 and Dow Jones Industrial Average index options.

CBOE Holdings Inc. (CBOE), the parent of the Chicago Board Options Exchange and McGraw-Hill Cos. (MHP) sued the exchange in 2006 to block it from competing with them. Judge William O. Maki in Chicago barred it from featuring the listings in July 2010, ruling that the CBOE has an exclusive license to offer options based on the S&P 500. The index is a licensed product of McGraw-Hill’s Standard & Poor’s Financial Services LLC.

The Illinois Appellate Court today upheld the injunction, rejecting International Securities’ appeal. The exchange’s “proposed actions constitute misappropriation in Illinois,” the court said. Today’s ruling also bars the Options Clearing Corp. from clearing options on these indexes unless they’re traded under CBOE licenses.

“We are obviously gratified that the court has ruled in CBOE’s favor,” William J. Brodsky, the CBOE chairman, said in a press release. “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 marketing them for over two decades.”

ISE is considering what it will do next, Molly McGregor, a spokeswoman, said in an e-mail. “We will evaluate all of the options to determine next steps but have no additional comment at this time,” she said.

The case is Chicago Board of Options Exchange v. International Securities Exchange LLC, 1-10-2228, Illinois Appellate Court (Chicago).

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