Last big private exchange to go public
NEW YORK — The last major private exchange in the United States, the Chicago Board Options Exchange, filed for an initial public offering of up to $300 million yesterday. It plans to convert from a member-owned organization to a publicly traded corporation, CBOE Holdings Inc., that analysts say could be worth up to $5 billion.
The Chicago exchange, the largest US platform for options trading, did not say when it plans to go public or how many shares it hopes to sell. The CBOE has wanted to go public for a long time. It settled a dispute over payment for ownership with CME Group, which operates the Chicago Mercantile Exchange and the Chicago Board of Trade, in August 2008.
“It’s the last of the bigger, well-known exchanges’’ to go public, said a Raymond James analyst, Patrick O’Shaughnessy.
The CBOE is making its move after years of growth. Founded in 1973, it was the world’s first marketplace for options — financial instruments whose value depends on an underlying asset, such as a stock.
Options are useful to investors because they can help hedge risk. The CBOE is famous for creating products such as the VIX, a gauge of risk known as the market’s “fear index.’’
The CBOE’s trading volume has exploded over the past decade, with 1.13 billion contracts changing hands in 2009, as technology helped to reduce costs, and as hedge funds and other money managers increasingly traded in derivatives and other new financial instruments.
But growth has created challenges. Even as trading of derivatives has jumped, the Securities and Exchange Commission and the Obama administration have proposed measures to regulate the trading of financial instruments, which could hurt the CBOE’s revenue.
New rules on short selling take effect in May.
A proposed ban on “flash orders,’’ which give investors a split-second edge in trading, and other measures related to the reform of financial regulation could hurt business, the CBOE said.