CME shares hit year low after $1B settlement with CBOE

CME, which owns the Chicago Mercantile Exchange and the Chicago Board of Trade, shed $11.80, or 2.9 percent, to $400.30. Earlier in the session, the stock fell to a new year low at $392.38.

The settlement, reached between the Board of Trade and the CBOE, would clear the way for the CBOE to become the third Chicago-based financial exchange to demutualize and go public--a process transforming it from a member-owned to a shareholder-owned corporation.

The dispute centered on how CBOT members should be compensated for their ownership of the CBOE options market they helped establish in 1973. The settlement will give CBOT members $300 million plus an 18 percent equity stake in the newly organized options exchange, valued between $2.5 billion and $6 billion.

BMO Capital Markets analyst Michael Vinciquerra said CME owns 159 exercise right privileges that it paid about $40 million for when it bought CBOT. He expects the exchange to book a gain of about $40 million to $70 million pretax.

He pointed out that CME has said "profiting from the ERPs is not its primary goal." The company is more interested, he said, in ending the two-year dispute that has kept CBOE member-owned.