CBOE telling would-be suitors to wait: CEO

NEW YORK (Reuters) - The Chicago Board Options Exchange, the largest U.S. options market, has been approached by potential suitors, but is telling them to wait until an ownership dispute is resolved, Chief Executive William Brodsky said on Tuesday.

The CBOE has been approached by major domestic and international exchanges, but is holding off to get a higher price and to avoid the complications that would come with striking a deal while a dispute over trading privileges is being litigated, Brodsky said at the Reuters Exchanges and Trading Summit.

The CBOE could be an attractive acquisition target at a time when many stock exchanges are seeking to boost margins by expanding into other asset classes, particularly options.

"Many people have come to us because it is obvious that we are the stand-alone options exchange, and we have a very attractive business model," Brodsky said. "We have suggested that we are better off getting the litigation behind us."

Asked if rather than a "for sale" sign up, the company's message was "buyers welcome to talk," Brodsky said, "No, we don't need to. It's a small universe of potential players out there."

"We have a host of possibilities, but we are just not ready to have that conversation," Brodsky said. "There is no discussion. And there won't be any until we move further down the demutualization path."

The dispute, which stems from trading rights under a decades-old agreement, has stymied CBOE's efforts to transform itself from a member-owned organization into a shareholder company, which could pave the way for an eventual initial public offering or a merger with another exchange.

The rights at issue date back to 1973, when the CBOE was created by the Chicago Board of Trade. Under rules, CBOT full members were allowed to trade options at the neighboring CBOE without having to buy a separate membership.

The CBOT and some of its members sued the CBOE in 2006 in a Delaware court to retain the trading rights, which would 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 U.S. Securities and Exchange Commission in January approved CBOE's rule change, which no longer grants trading rights to former CBOT members. The SEC decision, which took 13 months, put the ball back in the Delaware court. A hearing is expected there next month.

"It's a good old historic kind of Chicago brawl," Brodsky said.

The litigation is the final step in the dispute and could take six months to a year to resolve, he added.

"Our path is to demutualize, and when we demutualize, we'll have a whole host of strategic options," Brodsky said, adding that Goldman Sachs is advising the exchange.

The CBOE pioneered the listing of U.S. options, and is one of the few independent markets left after exchanges worldwide went on a buying spree to expand into new markets.

"We will have much more flexibility if we can get this behind us, and demutualize, and then see what our options are," Brodsky said. "We are not in any rush."

(Additional reporting by Doris Frankel; editing by Jeffrey Benkoe)

(For summit blog: summitnotebook.reuters.com/ )