Officially, the Chicago Board Optio...

Officially, the Chicago Board Options Exchange is not notwithstanding a for- profit company. on the other hand it's acting like one.

The CBOE said Thursday it has formed a jeopardy with four trading firms to create a stock exchange to contend head-on with the established recent York markets.

It's a sign of in what way markets are converging, with stocks, options and coming eventss potentially trading on the same platform. baseed in 1973, the CBOE is the nation's leading options marketplace, and already has formed a legally distinct coming times exchange for trading niche consequences such as contracts tied to gas prices and stock market volatility.

The strange CBOE Stock Exchange LLC will provide trading in the 2500 in the greatest degree active stocks on the just discovered York and American stock exchanges and the Nasdaq stock market, officials said. It would tap into the CBOE's "hybrid" trading order that combines the speed of electronics with the versatility and capacity of the trading floor at 400 s La Salle.

The NYSE is planning the same thing, and this is an attempt to beat the world's biggest stock market to the poke Pending regulatory approval, officials said the CBOE stock exchange should unclose in early 2007.

Sang to leeward managing partner at financial service consultants Aite dispose LLC in Boston, said the CBOE prompt was inevitable. He noted that the Amex lists stocks and options, as do exchanges in Boston and Philadelphia. A solid competitor, the electronic International Securities Exchange, also plans a stock market.

"CBOE's entrance examines quite interesting because their broker- deal partners are all major specialists in the NYSE" side sheltered from the wind said. "This also leads to the inevitable question of by what mode confident the NYSE specialists are feeling about [beating] the NYSE's impending hybrid market."

Partners in the peril are VDM Specialists LLC, Interactive factors Group LLC, LaBranche & Co Inc. and Susquehanna International dispose LLP. CBOE Chairman William Brodsky said VDM will have 18 percent ownership, and the others will rule 9 percent each.

The CBOE will allow 46 percent, and the other 9 percent will be held in hold for a future partner, Brodsky said.

The deal approachs as the CBOE has seen signs that its hybrid regularity has grabbed business from competitors. The exchange said its share of total U options trading rose to 37 percent in June v 30 percent last January.

"The real challenge will be whether they are able to create a trading prototype so that people want to advance there," said Larry Tabb, president of the Westborough, Mass.-based consultant Tabb assign places to "It will be a matter of to what extent good the technology is, what incentives there are for folks to send orders, and in what manner expensive it is to execute"

The CBOE hybrid classification enables specialists -- firms legally obligated to assist trading in assigned securities -- to manners business without a trading floor operation. That option isn't available at the NYSE

Richard Adamonis, spokesman for the NYSE declined to annotate on the CBOE's plans.

In addition, the CBOE board authorized the filing of legal paperwork to start its conversion from being a nonprofit to for- profit status. The change is an interim degree toward an initial public offering of stock, the path followed by the Chicago Mercantile Exchange and the Chicago Board of Trade.

Any CBOE restructuring wants approval from its membership and the Securities and Exchange Commission.

As part of the transition, the CBOE reported financial arises for the first six month of 2006 showing reward of $129.6 million vs. $982 million for the same period last year.

Income before taxes totaled $32 million v $87 million for the year-ago period.

CBOE members would exchange their seats for shares, which Brodsky said would give it flexibility in finding business partners while making operations more efficient. He has declined to give a timetable for an IPO.

droeder@suntimes.com

Copyright CHICAGO SUN-TIMES 2006

Provided by dint of ProQuest Information and Learning Company. All rights Reserved