STOCK-BASED COMPENSATION

6 Months Ended

Jun. 30, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

7,500,000 shares have been authorized for issuance in respect of equity awards under our Amended and Restated Stock Incentive Plan (“the Plan”). Under the Plan, awards are made to employees at the discretion of the Compensation Committee and to directors pursuant to an annual automatic grant under the Plan or at the discretion of the Board of Directors.

The charge for stock-based compensation in our condensed consolidated statements of operations was as follows:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2012		2011		2012		2011
Stock-based compensation charged	$	1,004	$	1,583	$	2,091	$	3,104
Income tax benefit recognized	—		—		—		—

Stock Options

A summary of option activity for the six months ended June 30, 2012 is presented below:

	Shares		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Outstanding at January 1, 2012	2,901,687		$	32.86	4.49	$	71
Exercised	(16,000	)	2.06
Forfeited	(593,687	)	35.85
Expired	(30,000	)	$	90.54
Outstanding at June 30, 2012	2,262,000		$	31.53	4.58	$	—
Vested or expected to vest	2,177,956		31.86		4.51	—
Exercisable at June 30, 2012	1,566,375		$	35.06	3.89	$	—

The fair value of stock options is estimated on the grant date using the Black-Scholes option-pricing model and recognized ratably over the requisite service period.

The exercise of stock options has generated a net operating loss brought forward in our Delaware subsidiary of US$ 5.3 million at January 1, 2012. In the six months ended June 30, 2012 and 2011, tax benefits of US$ nil and US$ nil, respectively, were recognized in respect of the utilization of part of this loss, and were recorded as additional paid-in capital, net of US$ 0.4 million and US$ nil of transfers related to the write-off of deferred tax assets arising upon forfeitures for the periods ending June 30, 2012 and 2011, respectively. The losses are subject to examination by the tax authorities and to restriction on their utilization.

The aggregate intrinsic value (the difference between the stock price on the last day of trading of the second quarter of 2012 and the exercise prices multiplied by the number of in-the-money options) represents the total intrinsic value that would have been received by the option holders had they exercised all in-the-money options as at June 30, 2012. This amount changes based on the fair value of our common stock.  As at June 30, 2012, there was US$ 6.7 million of total unrecognized compensation expense related to options.  

At the annual general meeting of CME Ltd on June 13, 2012, the shareholders approved the exchange of up to 1.7 million options for up to 0.9 million restricted stock units ("RSUs"). While we have yet to set the terms of any such exchange, and can not be assured of the number of options likely to be tendered, we expect the number of outstanding options to decrease significantly following the completion of the exchange program.

Restricted Stock Units

Pursuant to the Plan, we may grant RSUs to our employees and non-employee directors. Each RSU represents a right to receive one share of class A common stock of the Company for each RSU that vests in accordance with the vesting schedule, generally between one to four years from the date of grant. Upon vesting, shares of CME Class A common stock are issued from authorized but unissued shares. Holders of RSU awards are not entitled to receive cash dividend equivalents. The grant date fair value of RSUs is calculated as the closing price of our class A common shares on the date of grant.

The following table summarizes information about unvested RSUs as at June 30, 2012:

	Number of Shares/Units	Weighted- Average Grant Date Fair Value
Unvested at December 31, 2011	—	—
Granted	600,000	5.61
Unvested at June 30, 2012	600,000	5.61

As at June 30, 2012, the intrinsic value of unvested RSUs was US$ 3.0 million. Total unrecognized compensation cost related to unvested RSUs as at June 30, 2012, was US$ 2.9 million and is expected to be recognized over a weighted-average period of 2.21 years.