UPDATE 1-CBOE open to 'strategic transactions' - source

Wed Feb 23, 2011 2:50pm EST

* Company management's message to board - source

* Now a focus on how to respond to global mergers - source

* CBOE shares jump before handing back some gains (Adds shares, background, CEO quote, byline)

By Jonathan Spicer

NEW YORK, Feb 23 (Reuters) - The Chicago Board Options Exchange's parent is now formally open to "strategic transactions" such as a sale or merger with another exchange operator, a person with direct knowledge of the company's stance said on Wednesday.

At a Feb. 8 board meeting, CBOE Holdings Inc (CBOE.O) management used a PowerPoint presentation to, in part, tell directors that it would not be opposed to a transaction -- though no specific possibilities were outlined, said the source.

The source, who requested anonymity, added that the board did not oppose the concept of a transaction.

The next day, on Feb. 9, two major exchange deals were unveiled, including the takeover of Big Board parent NYSE Euronext NYX.N by Germany's Deutsche Boerse (DB1Gn.DE) and London Stock Exchange's (LSE.L) bid for Canada's TMX Group (X.TO). [ID:nN11154777]

In the last couple of weeks, the source said, many e-mailed and verbal messages have been exchanged internally on how CBOE, the No. 1 U.S. options market, will respond to the recent rash of global merger plans. Any change to strategy is expected to help drive the company's agenda in the weeks and months ahead, the source said.

CBOE shares jumped 5.8 percent after the Reuters report. They were up 2.4 percent at $26.60 later in afternoon trading.

A CBOE spokeswoman declined to comment.

The company went public last year and has since stressed its focus on growing as a stand-alone operator. In an interview on Wednesday, CBOE Chief Executive told Reuters that remaining a "niche player" was not the only way for the company to succeed. [ID:nN23297785]

CBOE had 27 percent of the overall U.S. options market last month, the most of the nine venues. (Reporting by Jonathan Spicer, editing by Gerald E. McCormick)