From: Robert Silverstein
Ms. Elizabeth K. King
Dear Ms. King:
As an individual who has attended Law School I find it interesting that people are expressing emotions and not legal issues with regards to the rule filing filed by the CBOE.
1.) The question of jurisdiction. The rule filing presented to the SEC was an interpretation of a rule in the 1992 agreement with the CBOT. This is not a contractual dispute but is an interpretation of a rule and therefore under the exclusive jurisdiction of the SEC. The SEC has made four prior rulings with regards to this rule and this case is no different is substance from the previous four rulings, and therefore under the complete jurisdiction of the SEC.
2.) The CBOT made a unilateral decision to be acquired by CME Holdings and this unilateral action will leave no “Members” under the definition of member after the transaction is complete.
3.) In order for the CBOT exercise right to serving the Purchase of the CBOT by the CME all three of the following requirements must apply:
A.) “The Survivor” must be an exchange. Under the terms of the Purchase Agreement, the surviving company is “CME Holdings” which is a holding company and not an exchange.
B.) The CBOT members must receive membership in the surviving company since the survivor is a Holding Company no CBOT Members will have memberships in the survivor.
C.) CME Holdings is a Holding Company and no CBOT Members will have full trading rights in the Holding Company. Also, as it states in their purchasing agreement all CME traders will be able to trade all new products after the purchase. This will have the effect of reducing CBOT trading rights from what they were prior to the acquisitions and therefore not constitute “Full Trading Rights”.
In conclusion in making this rule filing the CBOE is not changing any rights or taking away anything from any CBOT Member. What in essence is happening is the CBOE is interpreting the rules in light of the unilateral actions that the CBOT is taking. It is the exclusive actions of the CBOT that has caused it to undermine the nature of CBOT Membership to be put it in a position so that no CBOT Member will be able to qualify to become a Member or remain a Member through the exercise right.