CBOE Seeks $525 Million in Patent Case Against ISE

The parent of the Chicago Board Options Exchange sued a smaller rival over its use of electronic-trading functions, according to court documents filed Monday.

CBOE Holdings Inc. (CBOE) is seeking $525 million in damages from the International Securities Exchange, an all- electronic stock-options market based in New York.

The dispute turns on systems that CBOE alleged are used by the ISE designed to automatically adjust traders’ prices offered to buy or sell options contracts, which CBOE charged infringe upon CBOE’s own long-held patents.

Such a service, shielding traders from taking on overly risky exposure, is an “essential feature” of electronic options markets such as ISE, according to CBOE’s lawsuit. Rival owners of options exchanges, such as NYSE Euronext (NYX) and Nasdaq OMX Group Inc. (NDAQ), weren’t named in the complaint.

A spokeswoman for the ISE, owned by Germany’sDeutsche Boerse AG (DB1.XE, DBOEF), declined to comment.

The lawsuit was filed in the U.S. District Court for the Northern District of Illinois.

Besides the $525 million in damages sought, CBOE in its complaint asked for a judgment that would “treble” compensatory damages, as well as legal fees.

The lawsuit adds to a raft of court cases entwining the CBOE, owner of the oldest and busiest U.S. options exchange, and the ISE, its all-electronic rival launched in 2000.

by Jacob Bunge

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