February 19, 2007
What hubris on the part of the CBOE Board of Directors: not only to attempt unilaterally to "decree" a breach of contract on the part of the CBOT, but to attempt to take refuge behind the SEC in doing so.
No doubt the CBOE and CBOT are in a dispute which, at its core, concerns the distribution of shares to their constituent members in the event the CBOE demutualizes and then goes public (as the CBOE has acknowledged they plan to do). And maybe once those issues are resolved on their merits or by consent of the parties, a rule change will be required by the SEC in its role as the governing oversight body of the CBOE. Nothing, however, in the public interest requires the SEC now to approve a rule change which could have the effect of granting a financial windfall to one set of members to the financial exclusion of another set of members. Encroachment of SEC jurisdiction and issues of federal premption are not in jeopary here. In fact, if the implicit logic of the CBOE were adopted here, then essentially every time an exchange governed by the SEC had a dispute with anyone they could simply decree a breach, hide behind SEC jurisdiction and win the dispute regardless of the merits.
I have been a member of either the CBOE or the CBOT for over 30 years. During that time I served over 10 years on the CBOE arbitration committee both in the capacity of Vice-Chairman and Chairman. I have decided many cases arising from exchange related conduct. None have been as meritless as this proposed rule change by the CBOE Board of Directors.
Those who are members of the CBOT have been damaged and continue to be damaged by the CBOE's "decree". The SEC should summarily put an end to this by denying this empty, baseless, unnecessary, disingenuous request for a rule change and the CBOE Board of Directors should be admonished in the harshest terms for attempting this end run.
Surely the SEC will see this contrived maneuver for what it is: an attempt to forum shop a victory when a reasonable interpretation of history, the facts, and the law would dictate otherwise.
Charles B. Cox III