From: Thomas M. Shuff Jr.
Sent: February 13, 2007
Subject: File No. SR-CBOE-2006-106

-the CBOE firstly acknowledged a valuation for the CBOT's interest in their exchange, classified as an ERP (Exercise Right Privilege), by holding a dutch auction for those ERPs ($100,000) about 2 years ago.
-it would be a fair statement that the price they were willing to pay was "underwhelming", judging by the low percentage of rights acquired post-auction (less than 100 out of 1400 roughly).
-since they couldn't disavow themselves of the CBOT's interest at a price acceptable to themselves (but not the CBOT membership); they then simply moved to extinguish the ERP outright, claiming the proposed CBOT/CME merger releases them of any responsibility to their founding fathers (the CBOT). This is in sharp contrast to the 1992 agreement wherein a merger will not effect that status of the CBOE's responsibility (exercise right) as long as "the survivor of such merger, consolidation, or acquisition is an exchange that provides or maintains a market in commodity futures contracts or options, securities, or other financial instruments.....".
-what I find especially spurious about the CBOE's position is their most recent purchase of an ERP as recently as 2 weeks ago ($127,000). Why are they purchasing something that is worthless? This is a major inconsistency. If the CBOE found value ($127,000) with the current CBOT Holding Corporation (the previous membership class transformed to a now public stock corporation), then why should the proposed CBOT/CME Holding Corporation be viewed any differently--as nothing changes but a broader product line and improved economies of scale? It was a stock corporation 2 weeks ago and will remain so post-merger--with the same modus operandi.
-in short the CBOE could not purchase the ERP for the quantity and price THEY wished, so they simply moved to eradicate it without proper justification.

Yours Very Truly,

Thomas M. Shuff Jr.
CBOT Full Member