OCC Said to Approach Former CME CEO Donohue for Chairman

July 31 (Bloomberg) -- Options Clearing Corp. is in talks with Craig Donohue, the former chief executive officer of CME Group Inc., about hiring him as chairman, according to two people familiar with the matter.

The board of OCC, the world’s largest equity-derivatives clearinghouse, met in New York on July 23 to discuss the matter, according to the people, who asked not to be identified as the discussions were private. The Chicago-based company, which guarantees all options trading on U.S. exchanges, is negotiating terms with Donohue and the parties may yet fail to reach an agreement, the people said.

Wayne P. Luthringshausen, OCC’s 69-year-old chairman and CEO, will retire at the end of the year, the company said this week. OCC, which has 120 clearing members including the biggest banks and brokers, plans to separate the chairman and chief executive roles upon Luthringshausen’s departure, with Michael Cahill becoming CEO. The clearinghouse processes trades for exchanges such as ELX Futures and NYSE Liffe US that compete with CME, the world’s largest futures market.

Jim Binder, a spokesman for OCC in Chicago, declined to comment when contacted by phone today. Donohue, 51, didn’t immediately respond to two e-mails seeking comment.

Donohue, who spent 23 years at CME including eight as CEO, left on May 1 last year, describing his departure as “bittersweet.” He has an agreement not to compete with CME that runs until December this year, according to a regulatory filing from May 2, 2012. Born and raised in the Chicago area and a lawyer by training, Donohue received $6.1 million in compensation from CME in 2012.

OCC Board

OCC is owned by four of the U.S. options exchanges and its board comprises both banks and exchanges. The Chicago Board Options Exchange owns 20 percent of the clearinghouse and NYSE Euronext owns 40 percent.

Options are derivatives, or securities that derive their value from an underlying asset, and can be used to protect against a decline or to speculate on the future value of an asset. Investors use options to guard against fluctuations in the price of securities they own, speculate on share-price moves or bet that volatility, or stock swings, will increase or decrease.

CME reports second-quarter earnings tomorrow. Bearish options on the Chicago-based exchange have fallen to the cheapest level in more than two years as the debate on when the Federal Reserve will reduce economic stimulus boosts trading volume. Puts protecting against a 10 percent drop in the shares cost 3.99 points more than calls betting on a 10 percent rally, according to three-month data compiled by Bloomberg.

Interest-rate volume at CME last month was the highest since January 2008, Eurodollar futures trading almost doubled and Treasury options hit a record, the company said on July 2.

To contact the reporter on this story: Nandini Sukumar in London at nsukumar@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net