ISE bid for S&P, Dow Jones Indexes rejected by U.S. judge

December 19, 2013 04:54 AM

International Securities Exchange Holdings Inc. lost a second lawsuit over the Chicago Board Options Exchange’s exclusive license to list options based on the Standard & Poor’s 500 and Dow Jones indexes.

U.S. District Judge Alvin K. Hellerstein in Manhattan yesterday threw out the case, citing ISE’s loss of what he called an identical lawsuit in Illinois state courts, where the company was a defendant.

After bringing a federal case in New York and leaving it dormant for almost seven years, ISE and its co-defendant in the Illinois suit were now trying to re-litigate the same issues before his court, Hellerstein said.

“I hold that ISE cannot do so, that full faith and credit is to be given to the final judgment of the Illinois courts and that ISE’s lawsuit in this court is barred,” he said.

S&P Dow Jones Indices LLC, the winning defendant in yesterday’s ruling, owns benchmarks such as the S&P 500 Index and Dow Jones Industrial Average, which track the value of trillions of dollars in assets.

The New York-based firm licenses rights to companies that want to create financial instruments linked to those indexes.

CBOE Holdings Inc., owner of the Chicago Board Options Exchange, has exclusive rights through 2018 to offer options on the S&P 500 and S&P 100.

Exchange Barred

That means Deutsche Boerse AG’s International Securities Exchange, which runs one of the biggest U.S. options markets, is barred from expanding into a potentially lucrative business. S&P 500 options are CBOE’s biggest product by revenue, according to its last annual report.

“We are very disappointed by the judge’s decision and have no further comment at this time,” Molly McGregor, an ISE spokeswoman, said in an e-mailed statement.

CBOE Holdings sued ISE in Illinois in 2006 to block it from providing a forum for trading the index options.

Judge William O. Maki in Chicago barred ISE from featuring the listings in July 2010, ruling that the CBOE had an exclusive license to offer options based on the S&P 500.

His decision was upheld by an Illinois appellate court. The U.S. Supreme Court denied New York-based ISE’s bid for an appeal.

‘Fair Opportunity’

“Having had a full and fair opportunity,” ISE is bound by the Illinois trial court’s ruling, Hellerstein said. “That ruling precludes ISE’s claims against Dow Jones because it involved the same parties and the same underlying facts, issues and causes of action.”

CBOE Chief Executive Officer Edward T. Tilly said his company is “gratified” by yesterday’s ruling.

“Since ISE initiated the litigation more than seven years ago, every court at every level -– including the Illinois Appellate Court, the Illinois Supreme Court, the U.S. Supreme Court and now a New York court -– has rejected ISE’s attempt to trade products that are exclusively licensed to CBOE,” he said.

The New York case is International Securities Exchange LLC v. S&P Dow Jones Indices LLC, 06-cv-12878, U.S. District Court, Southern District of New York (Manhattan). The Illinois case is Chicago Board of Options Exchange v. International Securities Exchange LLC, 06CH24798, Cook County, Illinois Circuit Court, Chancery Division (Chicago); and Chicago Board of Options Exchange v. International Securities Exchange LLC, 1-10-2228, Illinois Appellate Court (Chicago).

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