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Tussle Over Index Options

ISE Challenges CBOE's Proprietary Index Offerings in Lawsuit

Traders Magazine, January 2007

Mark Longo

The index war has escalated. For years, the International Securities Exchange (ISE) has been content to take potshots at its main rival, the Chicago Board Options Exchange (CBOE). Its primary bone of contention is the CBOE's dominance of the index options market, particularly the lucrative S&P 500 (SPX) product line. In fact, the ISE hasadopted "Free the SPX" as its unofficial battle cry. However, after sniping at the CBOE through the press and at industry conferences, the ISE suddenly decided to raise the stakes in this long-simmering feud. On November 2, the ISE filed a lawsuit challenging the validity of proprietary index license agreements. Although the suit names Standard & Poor's (a unit of McGraw-Hill) and Dow Jones & Company, the intended target of this action is clearly the CBOE. The announcement of this lawsuit stunned the options industry.

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