CBOE says expects key court ruling in early June

By Doris Frankel

LAS VEGAS, May 2 (Reuters) - The Chicago Board Options Exchange expects a key court decision next month on an ownership dispute preventing it from becoming a for-profit company, the top official at the largest U.S. options market said on Friday.

A ruling on the status of trading rights of former Chicago Board of Trade members by a Delaware Chancery Court judge could come in the first week of June, CBOE Chief Executive William Brodsky told reporters at the annual options industry conference in Las Vegas.

"For the first time in 35 years there will be finality," Brodsky said. "We are into the last round of procedures and have taken all the necessary steps to demutualize."

The CBOE has been locked in a protracted legal dispute over trading rights under a decades-old agreement. The rights date back to when the CBOE was created by the CBOT in 1973 and allowed CBOT full members to trade options at the neighboring CBOE without having to buy a membership.

The CBOT and some of its members sued the CBOE in 2006 to retain the trading rights, which confer equity ownership in the options mart. CBOE contends that when CBOT was acquired by CME Group Inc CME.N last summer, those rights were terminated.

The dispute has stymied CBOE's efforts to transform into a shareholder company from a member-owned organization, paving the way for an eventual initial public offering or a merger with another exchange.

"CBOE's focus is to build the business and getting this litigation behind us," Brodsky said.

The CBOE, created in April 1973, pioneered the listing of U.S. options and is one of the few independent markets left after exchanges worldwide have embarked on a consolidation spree to expand into new markets.

Its efforts to demutualize moved one step further after the U.S. Securities and Exchange Commission in January approved its rule change which no longer grants trading rights to former CBOT members. The SEC ruling, which took 13 months, put the ball back in the Delaware court.

Brodsky did not rule out the possibility of a settlement between both sides. "It's a difficult issue because unlike corporate disputes we are not sitting down with the management of one institution with the management of another," he said.

Part of that stems from a class action suit involving former CBOT members. A settlement would also require a vote from the CBOE membership.

"While settlement is always an option, the dynamic is different than it is in many corporate cases," Brodsky said. "The good news is that we now have the last step of a very long drama." (Editing by Braden Reddall)