CBOE and S&P Dow Jones Extend Exclusive License to Index Options

CBOE Holdings Inc. (CBOE) and S&P Dow Jones Indices extended the options exchange’s exclusive license to trade contracts based on the Standard & Poor’s 500 Index until 2032.

The owner of the Chicago Board Options Exchange will be the only market with rights to list and trade options based on the S&P 500, the most-active U.S. index contract, and other broad gauges, the companies said in a statement today. Exclusive rights to the S&P 500 and S&P 100 previously expired in 2018 and those for the Dow Jones Industrial Average were supposed to end in 2017, according to CBOE. Financial terms of the deal weren’t disclosed.

Exchanges are seeking to boost revenue amid declining volume and increasing competition. International Securities Exchange Holdings Inc. said earlier this month that it plans to start an options market that will become the 12th U.S. exchange for equity derivatives. Exclusive trading agreements may help boost CBOE’s stock price, according to KBW Inc.’s Niamh Alexander.

“The extension of the exclusive S&P contract is a net positive and we expect the stock to react positively today,” Alexander, an analyst at KBW in New York, said about CBOE shares in a note to clients today.

CBOE shares rose 0.4 percent to $35.89 at 11:44 a.m. in New York today, extending its advance for the year to more than 21 percent. The Bloomberg World Exchanges (BNWEXCH) Index, which includes CBOE and 24 of its peers, has gained 13 percent this year.

CBOE will have non-exclusive rights to use the benchmark gauges as the basis of contracts until 2033, the statement said.

The deal extends a 30-year relationship between CBOE, home of the biggest U.S. options market, and the index provider, Bill Brodsky, chairman and chief executive officer of CBOE Holdings, told reporters at a briefing today at the annual Futures Industry Association conference in Boca Raton, Florida.

“We initiated conversations with S&P primarily driven by the fact that the analyst community was pressing us constantly about the duration of the contract,” Brodsky said.

To contact the reporter on this story: Nina Mehta in New York at nmehta24@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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