The Chicago Board of Trade and representatives of the class who have filed suit against the Chicago Board Options Exchange in Delaware Chancery Court over CBOE’s attempt to terminate CBOT member exercise rights filed a temporary restraining order on July 20, seeking to prevent CBOE from terminating the exerciser rights while the issue is under consideration by the Court.

On July 2, CBOE adopted a rule change granting temporary membership status to CBOT members exercising on the CBOE until the Securities and Exchange Commission takes action on the CBOE rule filing attempting to extinguish those rights. Exercisers as of July 1, 2007 would be able to continue trading on CBOE and would be charged a fee. All other CBOT members with the necessary components to become exercisers would no longer be eligible. There are approximately 600 CBOT members who hold the exercise right privilege (ERP) and the necessary class A shares to become CBOE exercisers, who would be affectively locked out by the CBOE rule change. Also CBOT members leasing those rights out would no longer receive leasing fees as the CBOE will hold those fees in an escrow account in lieu of a monthly access fee to exercisers.

The Delaware Court set a July 31 hearing date on the temporary restraining order motion.

“CME Group is committed to vigorously defending the rights of CBOT B-1 members in the Delaware litigation against CBOE,” states a CME Group release. “CME Group and CBOT continue to believe that the merger of CBOT Holdings and CME Holdings Inc. did not impair the exercise rights of CBOT B-1 members under the terms of the 1992 Agreement and the CBOE Charter.”

The CBOT motion states that the Court should grant a restraining order because the actions of the CBOE drastically alters the status quo and immediately impacts class members while the CBOE would not be harmed by awaiting a ruling by the court on the plaintiff’s claims.

While the CME won its battle with the Intercontinental Exchange (ICE) over the CBOT, one of the moves made by ICE during the process that had CBOT members stand up and take notice and perhaps granted ICE more legitimacy was its ability to work out a deal with CBOE over the ERPs. It forced the CME to up its offer and take off spending limits to defend those rights.

An optimist may have thought that the ICE/CBOE proposed deal would serve as a template for a future settlement on the ERP issue but with CBOT members flush with cash and the CME taking off limits to defend the ERP, we are back to two sides offering an all or nothing solution.