CBOE will keep policing its own markets, new chief says

NEW YORK, June 7 Fri Jun 7, 2013 1:38pm EDT

NEW YORK, June 7 (Reuters) - CBOE Holdings Inc, whose regulatory programs have been subject to a federal probe, is not giving up the job of policing its own markets, nor is it leaning toward splitting off its regulatory unit, the options exchange's new CEO said Friday.

"We are first and foremost committed to our regulatory functions as we are in them today, for the foreseeable future," Edward Tilly, CBOE's CEO since last month, said at an industry conference sponsored by Sandler O'Neill.

CBOE has been in talks with regulators about potentially splitting off its regulatory unit, either into a separate regulator or by handing the reins to the Financial Industry Regulatory Authority, or Finra, the Wall Street Journal reported in April.

Tilly played down the possibility on Friday.

"I would never say never," Tilly said. "As you say, it might be spun off, or we might look at something else, but for today and for the foreseeable future, we are committed to being in the regulatory business."

The Securities and Exchange Commission has been investigating the operator of the oldest U.S. stock-options trading venue since at least early 2012 in connection with conflicts of interest related to the exchange's role as a front-line overseer of Chicago brokerage OptionsXpress, now owned by Charles Schwab Corp.

CBOE expects to be fined as much as $10 million to resolve the probe, and for any settlement to require it to beef up its compliance and regulatory programs.

The exchange has already made some changes to its compliance division in response to the probe and earlier this year said it would remove board directors with ties to trading firms.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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