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As filed with the Securities and Exchange Commission on August 14, 2009

Registration No. 333-140574



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


Amendment No. 4 to
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933


CBOE Holdings, Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
  6200
(Primary Standard Industrial
Classification Code Number)
  20-5446972
(I.R.S. Employer Identification No.)

c/o Chicago Board Options Exchange, Incorporated
400 South LaSalle Street
Chicago, Illinois 60605, (312) 786-5600

(Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices)

Joanne Moffic-Silver
Executive Vice President and General Counsel
Chicago Board Options Exchange, Incorporated
400 South LaSalle Street
Chicago, Illinois 60605
(312) 786-7462
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:
Michael L. Meyer, Esq.
Robert J. Minkus, Esq.
Schiff Hardin LLP
6600 Sears Tower
Chicago, Illinois 60606
(312) 258-5500

      Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this Registration Statement becomes effective and all other conditions to the consummation of the proposed restructuring transaction described herein have been satisfied or waived.

      If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box:    o

      If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

      If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o   Accelerated filer o   Non-accelerated filer o
(Do not check if a smaller reporting company)
  Smaller reporting company o

      If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

      Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) o

      Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) o


CALCULATION OF REGISTRATION FEE


Title of each class of securities to be registered
  Proposed
maximum aggregate
offering price

  Amount of
registration fee(4)


Unrestricted Common Stock, Class A Common Stock, Class A-1 Common Stock and Class A-2 Common Stock, each par value $0.01 per share(1)(2)(3)   $183,800,000   $19,667

(1)
Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(f)(2) under the Securities Act, based on the aggregate book value of Chicago Board Options Exchange, Incorporated, a Delaware non-stock corporation, or the CBOE, as of December 31, 2006 of $183,800,000. The securities to be registered are to be offered in connection with the restructuring transaction, a transaction in which such securities will be distributed to current members of the CBOE in respect of such current members' existing memberships in the CBOE on the date of the restructuring transaction.
(2)
In accordance with Rule 457(o) under the Securities Act of 1933, the number of shares is not set forth herein. Pursuant to Rule 457(o), the registration fee has been computed on the basis of the maximum aggregate offering price, as established above, of all the common stock to be issued upon completion of the restructuring transaction.
(3)
The Class A-1 Common Stock and Class A-2 Common Stock is being registered in connection with the possible future conversion of the Class A Common Stock into such Class A-1 Common Stock and Class A-2 Common Stock, and the Unrestricted Common Stock is being registered in connection with the possible future conversion of the Class A-1 Common Stock and Class A-2 Common Stock into such Unrestricted Common Stock.
(4)
Previously paid.

      The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.





EXPLANATORY NOTE

        This registration statement is being filed in connection with the proposed demutualization of the Chicago Board Options Exchange, Incorporated, a Delaware non-stock corporation (the "CBOE"), in which the outstanding regular memberships in the CBOE that were made available by the CBOE and were acquired by CBOE members ("CBOE Seats") would be converted into stock of the registrant. Paragraph (b) of Article Fifth of the CBOE's Certificate of Incorporation ("Article Fifth(b)") grants to full members of The Board of Trade of the City of Chicago, Inc. (the "CBOT") the right to be members of CBOE without having to acquire a separate CBOE membership (commonly referred to as the "Exercise Right"). On August 23, 2006, the CBOE and its directors were sued in the Court of Chancery of the State of Delaware, by the CBOT, CBOT Holdings Inc., the parent corporation of the CBOT ("CBOT Holdings"), and two members of the CBOT who purported to represent a class of individuals ("Exercise Member Claimants") who claim that they were, or had the right to become, members of the CBOE pursuant to the Exercise Right (the "Delaware Action"). Plaintiffs sought a judicial declaration that Exercise Member Claimants were entitled to receive the same consideration in the CBOE's proposed demutualization as all other CBOE members, and plaintiffs also sought an injunction to bar the CBOE and the CBOE's directors from issuing any stock to CBOE members as part of the proposed demutualization transaction, unless Exercise Member Claimants received the same stock and other consideration as other CBOE members.

        On July 12, 2007, Chicago Mercantile Exchange Holdings, Inc. ("CME Holdings") acquired the CBOT through the merger of CBOT Holdings into CME Holdings (the "CME/CBOT Transaction"). The announcement of the CME/CBOT Transaction required CBOE to determine the effect of the CME/CBOT Transaction on the Exercise Right. CBOE's determination, which was reflected in an interpretation of Article Fifth(b) that was filed with and approved by the Securities and Exchange Commission (the "SEC"), was that following the completion of the CME/CBOT Transaction there would no longer be any members of the CBOT who would qualify to become or remain a member of the CBOE pursuant to the Exercise Right.

        On July 29, 2009, the Delaware Court entered a final order approving the Stipulation of Settlement, dated August 20, 2008, among the CBOE and the other parties to the Delaware Action (the "Settlement Agreement"), pursuant to which the parties agreed that (i) the Delaware Action would be dismissed, with prejudice, (ii) following the final approval of the Settlement Agreement by the court, there would no longer be any persons eligible to become members of the CBOE pursuant to the Exercise Right, and (iii) the CBOE would pay the participating members of the settlement class, upon the proposed demutualization of the CBOE or other event in which the CBOE is converted from a membership company, either cash or cash and securities, depending on the form of transaction consummated by the CBOE and whether the participating settlement class member is a Participating Class A Settlement Class Member or a Participating Class B Settlement Class Member. The order is subject to any appeals that may be filed by August 28, 2009. No appeals had been filed as of the date this registration statement was filed. For more information on the Settlement Agreement please see "The Restructuring Transaction—Exercise Right Settlement Agreement." A copy of the Settlement Agreement, as amended, is filed with this Registration Statement as Exhibit 4.4.

        The description of the restructuring transaction in this Registration Statement, including the description of the conversion of CBOE Seats into common stock of the registrant, reflects the fact that, subject to the resolution of any appeals of the approval of the Settlement Agreement, (i) the Delaware Action has been dismissed, (ii) the Exercise Right no longer provides members of the CBOT with any right to become or remain a member of the CBOE, (iii) no consideration will be paid as part of the restructuring transaction to persons in respect of a claim that they qualify as exercise members and (iv) any consideration to be paid to members of the settlement class will be paid pursuant to the terms of the Settlement Agreement only.


The information contained in this document is subject to completion or amendment. A registration statement relating to these securities has been filed with the United States Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This document is not an offer to sell these securities and it is not soliciting an offer to buy these securities, nor shall there be any sale of these securities, in any jurisdiction in which such offer, solicitation or sale is not permitted or would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

SUBJECT TO COMPLETION, DATED                        , 2009

GRAPHIC

Dear Members:

        In response to the many changes that have taken place in U.S. options exchanges and other securities markets in recent years, the Board of Directors of the Chicago Board Options Exchange, Incorporated (the "CBOE") has concluded that it would be in the best interest of the CBOE and its members for the CBOE to change its organizational structure from a non-stock corporation owned by its members to become a wholly-owned subsidiary of a new holding company, CBOE Holdings, Inc., organized as a stock corporation owned by its stockholders. This type of organizational restructuring is sometimes referred to as a "demutualization" or "restructuring" transaction.

        We are sending you this proxy statement and prospectus in order to provide you with important information concerning the proposed restructuring of the CBOE, which must be approved by a vote of the CBOE membership before it can be implemented. It also must be approved by the Securities and Exchange Commission.

        In the proposed restructuring transaction, each regular membership made available by the CBOE in accordance with the Rules of the CBOE and held by a CBOE member on the date of the restructuring transaction will be converted into the right to receive             shares of Class A common stock of CBOE Holdings. Our members will receive a total of              shares of common stock in CBOE Holdings in the restructuring transaction. In addition, certain persons who satisfy the qualification requirements set forth in the Stipulation of Settlement, dated August 20, 2008, among CBOE and the other parties to the Delaware action concerning the exercise right litigation, for participating in the settlement of the exercise right litigation will be issued            shares of Class B common stock of CBOE Holdings.

        Following the restructuring transaction, the CBOE will become a wholly-owned subsidiary of CBOE Holdings, the newly formed holding company. The CBOE Holdings common stock issued in the restructuring transaction will not provide its holders with physical or electronic access to the CBOE's trading facilities. Instead, physical and electronic access to the CBOE trading facilities, subject to such limitations and requirements as will be specified in the Rules of the CBOE, will be available to individuals and organizations that have obtained a trading permit from the CBOE.

        The common stock of CBOE Holdings will represent an equity ownership interest in that company and will have traditional features of common stock. The common stock will be subject to certain transfer restrictions or "lock-up restrictions" under CBOE Holdings' certificate of incorporation. In the event CBOE Holdings engages in a public offering of its common stock in the future, the shares of CBOE Holdings common stock automatically will convert into shares of Class A-1 common stock and Class A-2 common stock and will be subject to additional lock-up restrictions.

        We do not currently intend to list the common stock of CBOE Holdings on any stock exchange immediately following the completion of the restructuring transaction. If CBOE Holdings engages in a public offering in the future, we expect that the common stock of CBOE Holdings would be listed at that time. There can be no assurances, however, that a public offering of CBOE Holdings will occur or that the common stock of CBOE Holdings will ultimately be listed on any stock exchange.

        We will hold a special meeting at which we will ask all of the Voting Members of the CBOE to approve the restructuring transaction. Approval of the restructuring transaction requires the affirmative vote of a majority of all of the memberships outstanding.

        OUR BOARD OF DIRECTORS HAS APPROVED THE RESTRUCTURING TRANSACTION AND RECOMMENDS THAT THE MEMBERS VOTE "FOR" ITS APPROVAL.

        Your vote is very important. Whether or not you plan to attend the special meeting of members, please vote as soon as possible to make sure your membership is represented at the special meeting. Your failure to vote will have the same effect as voting against the restructuring transaction.

        We urge you to read this document carefully, including the "Risk Factors" section that begins on page 15.

        Neither the Securities and Exchange Commission nor any state securities regulator has approved or disapproved these securities, or determined if this proxy statement and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

        This document is dated                        ,        and was first mailed, with the form of proxy, to members on or about                        ,        .



CHICAGO BOARD OPTIONS EXCHANGE, INCORPORATED
Notice of Special Meeting of Members
To Be Held on                        , 2009

        To the Members of the Chicago Board Options Exchange, Incorporated (the "CBOE"):

        A special meeting of members of the Chicago Board Options Exchange, Incorporated will be held in the                        at 400 South LaSalle Street, Chicago, Illinois 60605, on                         , 2009 at    :     a.m., local time, for the following purposes:

        (1)   to vote on the adoption of the Agreement and Plan of Merger that will provide for the restructuring of the CBOE;

        (2)   to consider and vote on any proposal that may be made by the Vice Chairman of the Board of the CBOE to adjourn or postpone the CBOE special meeting for the purpose of soliciting proxies with respect to the proposal to adopt the Agreement and Plan of Merger; and

        (3)   to transact any other business that may properly come before the CBOE special meeting or any adjournment or postponement of the CBOE special meeting.

        Each Voting Member of the CBOE of record and in good standing as of the close of business on                        , 2009, the record date for the meeting, will be entitled to vote on the matters presented at the special meeting and at any adjournment thereof. Each Voting Member of the CBOE entitled to vote will be entitled to one vote for each membership with respect to which it has the right to vote. The presence in person or by proxy of CBOE members entitled to cast a majority of the total number of votes entitled to be cast at the meeting constitutes a quorum at the meeting.

        The adoption of the Agreement and Plan of Merger requires the affirmative vote of a majority of the outstanding CBOE memberships. If you do not vote or if you abstain from voting on this proposal, it will have the same effect as a vote against the proposal.

        If no quorum of the CBOE members is present in person or by proxy at the special meeting, the special meeting may be adjourned by the members present and entitled to vote at that meeting.

        THE CBOE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL AND ADOPTION OF THE AGREEMENT AND PLAN OF MERGER TO ACCOMPLISH THE RESTRUCTURING TRANSACTION AND "FOR" ANY PROPOSAL THAT MAY BE MADE BY THE VICE CHAIRMAN OF THE BOARD OF THE CBOE TO ADJOURN OR POSTPONE THE CBOE SPECIAL MEETING FOR THE PURPOSE OF SOLICITING PROXIES.

        You may vote your CBOE membership in person or by proxy. You may submit your ballot and proxy by phone, through the Internet, by mail in the postage paid envelope or by delivering your ballot and proxy to the Office of the Secretary by fax or hand. Members voting by proxy must submit ballots and proxies by no later than                        , 2009.

        Please vote promptly whether or not you expect to attend the special meeting.

        Returning your completed ballot and signed proxy will not prevent you from changing your vote or revoking your proxy and voting in person at the special meeting of members. Please note, however, that if you submit your ballot and proxy through one of the available methods prior to the meeting, you will not need to attend the special meeting of members, or take any further action in connection with the special meeting, because you already will have directed your proxy to deliver your ballot with respect to the proposals. You may change your vote and revoke your proxy any time before the special meeting by providing written notice to the Secretary of the CBOE or by submission of a later-dated ballot and proxy.

By order of the board of directors,

GRAPHIC

Joanne Moffic-Silver
Executive Vice President,
General Counsel and Secretary
On behalf of the board
                        , 2009



TABLE OF CONTENTS

CERTAIN FREQUENTLY USED TERMS   1
SUMMARY   2
UNAUDITED SUMMARY CONDENSED CONSOLIDATED FINANCIAL DATA   14
RISK FACTORS   15
FORWARD-LOOKING STATEMENTS   27
SPECIAL MEETING OF CBOE MEMBERS   29
THE RESTRUCTURING TRANSACTION   33
UNAUDITED SELECTED CONDENSED CONSOLIDATED FINANCIAL DATA   60
CBOE MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   62
BUSINESS   85
REGULATION   111
DIRECTORS AND MANAGEMENT OF CBOE AND CBOE HOLDINGS AFTER THE RESTRUCTURING TRANSACTION   121
DESCRIPTION OF CBOE HOLDINGS CAPITAL STOCK   146
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE RESTRUCTURING TRANSACTION   155
COMPARISON OF RIGHTS PRIOR TO AND AFTER THE RESTRUCTURING TRANSACTION   160
LEGAL MATTERS   171
EXPERTS   171
WHERE YOU CAN FIND MORE INFORMATION   171
ANNEX A CHICAGO BOARD OPTIONS EXCHANGE, INCORPORATED AND SUBSIDIARIES FINANCIAL STATEMENTS   A-1
ANNEX B UNAUDITED PRO FORMA FINANCIAL STATEMENTS OF CHICAGO BOARD OPTIONS EXCHANGE INCORPORATED   B-1
ANNEX C FORM OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF CBOE HOLDINGS, INC.   C-1
ANNEX D FORM OF BYLAWS OF CBOE HOLDINGS, INC.   D-1
ANNEX E FORM OF CERTIFICATE OF INCORPORATION OF CHICAGO BOARD OPTIONS EXCHANGE, INCORPORATED   E-1
ANNEX F FORM OF BYLAWS OF CHICAGO BOARD OPTIONS EXCHANGE, INCORPORATED   F-1
ANNEX G FORM OF AGREEMENT AND PLAN OF MERGER   G-1
ANNEX H SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW   H-1
ANNEX I FORM OF VOTING AGREEMENT   I-1


CERTAIN FREQUENTLY USED TERMS

        Unless otherwise specified or if the context so requires:

1



SUMMARY

        This summary highlights selected information in this document and may not contain all of the information that is important to you. You should carefully read this entire document, including its annexes and exhibits, and the documents incorporated by reference into this document for a more complete understanding of the matters to be considered at the special meeting.

Our Business

        Founded as a member-owned, non-stock Delaware corporation, the CBOE began operating as an exchange on April 26, 1973 as the first organized marketplace for the trading of standardized, listed options on equity securities. Since the CBOE's inception, the CBOE has grown to become one of the world's leading exchanges for the trading of derivatives and is recognized globally for its leadership role in the trading of options on individual equities, exchange-traded funds and cash-settled equity indexes. As of June 30 2009, the CBOE had 596 employees.

        The CBOE's volume of contracts traded in 2008 was approximately 1.2 billion contracts, representing an increase of 26% over its volume in 2007, for a daily average of 4.7 million contracts. In 2007, volume of contracts traded at the CBOE was over 944 million contracts with an average of 3.8 million contracts per day, representing an increase of 40% over 2006. In 2006, volume of contracts traded at the CBOE was approximately 675 million contracts for an average of nearly 2.7 million contracts per day. In 2008, 2007, and 2006, trades at the CBOE represented 33.3%, 33.0% and 33.3%, respectively, of the total contracts traded on all U.S. options markets. For the twelve months ended December 31, 2008 and 2007, the CBOE generated revenue of approximately $424 million and $352 million, respectively. The CBOE generates revenue primarily from the following sources:

        The CBOE is a self-regulatory organization, or SRO, under the Securities Exchange Act of 1934, and, as such, is subject to regulation and oversight by the Securities and Exchange Commission, or the SEC. As an SRO, the CBOE plays a critical role in the U.S. securities markets: it conducts market surveillance and examines members and member organizations for and enforces compliance with federal securities laws and the CBOE's Rules. Since March 24, 2004, the CBOE has also operated the CBOE Futures Exchange, LLC as a designated contract market under the oversight of the Commodity Futures Trading Commission. On July 27, 2006, the CBOE announced the creation of the CBOE Stock Exchange, LLC (CBSX), a facility of the CBOE in which the CBOE holds a 50% interest. CBSX began trading stocks in the first quarter of 2007. On October 21, 2008, the CBOE announced that it had approved a plan to launch a new and separate options exchange, which we are currently referring to as "C2." CBOE expects C2 to launch in late 2009 or early 2010, pending regulatory approval.

        Our principal executive office is located at 400 South LaSalle Street, Chicago, Illinois 60605, and our telephone number is (312) 786-5600.

The Proposed Restructuring Transaction (See page 33)

        General.    In the restructuring transaction, the CBOE will change from a Delaware non-stock corporation owned by its members to a Delaware stock corporation that will be a wholly-owned

2


subsidiary of CBOE Holdings, Inc., a newly created holding company organized as a Delaware stock corporation. After the restructuring transaction, the owners of CBOE membership interests will become stockholders of CBOE Holdings through the conversion of their memberships into shares of common stock, par value $0.01 per share, of CBOE Holdings. CBOE Holdings will hold all of the outstanding common stock of the CBOE. The CBOE will continue to function as an SRO and to operate its options exchange business. Immediately following the restructuring transaction, the CBOE will transfer all of its interest in its subsidiaries (other than CBOE Stock Exchange, LLC) to CBOE Holdings, and as a result, each of the CBOE's subsidiaries (other than CBOE Stock Exchange, LLC) will become a wholly-owned direct subsidiary of CBOE Holdings. CBOE Stock Exchange, LLC will remain a subsidiary of the CBOE. The CBOE currently holds a 50% interest in CBOE Stock Exchange, LLC.

Reasons for the Restructuring Transaction (See page 39)

        For the reasons described in this proxy statement and prospectus, the CBOE board of directors recommends that you vote "FOR" the proposal to approve the agreement and plan of merger to accomplish the restructuring transaction. See "The Restructuring Transaction—The CBOE's Reason for the Restructuring Transaction" on page 39.

Implementation of the Restructuring Transaction (See page 33)

        The restructuring transaction will be completed through the merger of CBOE Merger Sub, Inc. with and into the CBOE, with the CBOE surviving the merger as a Delaware stock, for-profit corporation. We refer to this transaction as the "Merger." Upon the effectiveness of the Merger:

        As a result, CBOE Holdings will become the sole stockholder of the CBOE. The form of agreement and plan of merger is attached hereto as Annex G to this proxy statement and prospectus. For purposes of this proxy statement and prospectus, we refer to this agreement as the "Agreement and Plan of Merger." Immediately following the Merger, the CBOE will transfer to CBOE Holdings the shares the CBOE owns in its subsidiaries (other than CBOE Stock Exchange LLC), making them first-tier, wholly-owned subsidiaries of CBOE Holdings.

What You Will Receive in the Restructuring Transaction (See page 41)

        CBOE Holdings, Inc. Common Stock.    In the restructuring transaction, each CBOE Seat existing on the date of the restructuring transaction will be converted into the right to receive             shares of Class A common stock of CBOE Holdings. In addition, each Participating Group A Settlement Class Member will be issued, immediately following the Merger and as required by the Settlement Agreement,             shares of Class B common stock of CBOE Holdings.

        If CBOE Holdings completes a public offering, each outstanding share of Class A common stock and Class B common stock automatically shall be converted into one-half of one share of Class A-1 common stock and one-half of one share of Class A-2 common stock, effective upon the completion of such public offering. The Class A-1 and A-2 common stock shall have all the same rights and privileges as the Class A common stock; however, the Class A-1 and A-2 common stock will be issued subject to certain transfer restrictions that will continue following the closing of a public offering for different durations. For a description of these transfer restrictions, please see below.

3


        Transfer of CBOE Holdings Common Stock Following the Restructuring Transaction.    Following the restructuring transaction and unless and until a public offering by CBOE Holdings of its common stock has been completed, pursuant to the certificate of incorporation of CBOE Holdings, transfers of the common stock of CBOE Holdings may only take place through the agent of CBOE Holdings that has been designated by CBOE Holdings to manage such transfers and through the broker or market designated by CBOE Holdings as the sole broker or market for such transfers. It is intended that this process will function much like the existing process for the sale and transfer of CBOE Seats.

        In addition, in the event the CBOE Holdings board of directors determines to proceed with a future public offering, the board may institute lock-up restrictions with respect to the Class A and Class B common stock by issuing a press release to the effect that such transfer restrictions will commence on a date no earlier than 10 calendar days following the date of such announcement. These transfer restrictions are sometimes referred to as the "Interim Transfer Restrictions." The Class A and Class B common stock shall remain subject to these Interim Transfer Restrictions until such shares are converted into shares of Class A-1 and A-2 common stock at the time of the closing of any such public offering. At that time, the shares of Class A-1 and A-2 common stock will be issued subject to similar transfer restrictions. During this lock-up period, shares of Class A common stock and Class B common stock of CBOE Holdings may not be directly or indirectly assigned, offered for sale, sold, transferred or otherwise disposed of, except pursuant to limited exceptions set forth in the CBOE Holdings certificate of incorporation, which provides for certain permitted transfers to affiliates, family members, qualified trusts and estates, as well as certain pledges and the potential transfer upon a bona fide foreclosure resulting therefrom.

        Transfer Restrictions on CBOE Holdings Common Stock Following a Public Offering.    In the event CBOE Holdings engages in a public offering of its common stock in the future, the Class A and Class B common stock shall automatically convert, effective at the time of the closing of such public offering, into shares of Class A-1 and Class A-2 common stock of CBOE Holdings and upon issuance will be subject to the transfer restrictions or "lock-up restrictions" under CBOE Holdings' certificate of incorporation. The lock-up restrictions will expire on the Class A-1 and Class A-2 common stock as of the 180th and 360th day, respectively, following the closing date of any such public offering. During any applicable lock-up period, shares of common stock may not be directly or indirectly assigned, offered for sale, sold, transferred or otherwise disposed of, except pursuant to limited exceptions set forth in the CBOE Holdings certificate of incorporation, which provides for certain permitted transfers to affiliates, family members, qualified trusts and estates, as well as certain pledges and the potential transfer upon a bona fide foreclosure resulting therefrom. Subject to possible extension in the event of an organized sale, as set more fully in this proxy statement and prospectus, upon the expiration of the applicable lock-up period with respect to the common stock, the shares of the common stock then scheduled to expire would automatically convert to unrestricted common stock, which would be freely transferable.

        In addition to the restrictions described above, all shares of Class A, Class B, Class A-1 and Class A-2 common stock must be registered in the name of the owner and may not be registered in the name of any nominee or broker.

Who Will Receive the Restructuring Consideration (See page 43)

        The CBOE Holdings Class A common stock issued in the restructuring transaction will be issued to the owner of the CBOE Seat. A lessee of a membership in respect of a CBOE Seat will not receive any CBOE Holdings common stock in the restructuring transaction. Members who are lessees of their memberships, however, will have the opportunity to apply for a trading permit following the restructuring transaction. For information regarding the terms and conditions of the CBOE trading permits and the process for obtaining such a permit, please see "The Restructuring Transaction—Trading Permits" on page 44.

4


        Participating Group A Settlement Class Members and Participating Group B Settlement Class Members will not receive any consideration in the restructuring transaction or in the Merger effecting the restructuring transaction. Immediately following the restructuring transaction, Participating Group A Settlement Class Members will have the right to receive Class B common stock of CBOE Holdings, and both the Participating Group A and Group B Settlement Class Members will have the right to receive the cash consideration to be paid pursuant to the Settlement Agreement. For more information on the Settlement Agreement, please see "The Restructuring Transaction—Exercise Right Settlement Agreement" on page 51.

CBOE Holdings Capital Stock (See page 146)

        General.    The unrestricted common stock and the Class A, Class A-1 and Class A-2 common stock of CBOE Holdings will represent an equity ownership interest in that company and will have traditional features of common stock, including dividend, voting and liquidation rights. The unrestricted common stock and the Class A, Class A-1 and Class A-2 common stock will provide the holder with the right to receive dividends as determined by the CBOE Holdings board of directors and the right to share in the proceeds of liquidation, in each case, ratably on the basis of the number of shares held and subject to the rights of holders of CBOE Holdings preferred stock, if any. The Class B common stock of CBOE Holdings will have the same rights and privileges as the unrestricted common stock and the Class A, Class A-1 and Class A-2 common stock except with respect to voting privileges. If CBOE Holdings completes an initial public offering of shares of stock to investors, all shares of Class A and Class B common stock will convert to shares of Class A-1 and Class A-2 common stock effective upon completion of such offering, as described in "Description of CBOE Holdings Capital Stock—Common Stock" on page 146.

        Authorized.    As of the effective time of the restructuring transaction, CBOE Holdings will be authorized to issue up to (i)              shares of unrestricted common stock, $0.01 par value per share, (ii)              shares of Class A common stock, $0.01 par value per share, (iii)              shares of Class A-1 common stock, $0.01 par value per share, (iv)              shares of Class A-2 common stock, $0.01 par value per share, (v)              shares of Class B non-voting common stock, $0.01 par value per share, and (vi) up to 20,000,000 shares of preferred stock, $0.01 par value per share. The unrestricted common stock and the Class A, Class A-1 and Class A-2 common stock will have the same rights and privileges, except the Class A, Class A-1 and Class A-2 common stock will be subject to the transfer restrictions described in "What You Will Receive in the Restructuring Transaction" on page 41. The unrestricted common stock will be freely transferable. The Class A-1 and Class A-2 common stock will be identical, except that the transfer restrictions associated with each class will be of a different duration as described in "What You Will Receive in the Restructuring Transaction" on page 41. The Class B common stock will have the same rights and privileges as the Class A common stock, except the Class B common stock shall have no voting privileges or rights except for certain rights as described in "Description of CBOE Holdings Capital Stock—Common Stock" on page 146. CBOE Holdings will have the ability to issue preferred stock and unrestricted common stock, including in connection with a public offering of shares of stock to investors who were not members of the CBOE prior to the restructuring transaction and are not holders of trading permits in the CBOE following the restructuring transaction. CBOE Holdings has no current intention to issue any shares of its preferred stock.

        Lock-Ups & Restrictions.    The CBOE Holdings certificate of incorporation imposes certain transfer restrictions, or "lock-ups," on the Class A, Class B, Class A-1 and Class A-2 common stock of CBOE Holdings. For a discussion of these restrictions, please see "The Restructuring Transaction—What You Will Receive in the Restructuring Transaction—Transfer Restrictions on CBOE Holdings Common Stock Following the Restructuring Transaction" on page 42.

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        Ownership and Voting Limitations.    The CBOE Holdings certificate of incorporation imposes certain ownership and voting limitations on the common stock of CBOE Holdings. For a description of these restrictions, please see "Description of CBOE Holdings Capital Stock—Ownership and Voting Limits on CBOE Holdings Common Stock" on page 151.

Organized Sales (See page 153)

        If CBOE Holdings completes a public offering, CBOE Holdings will have the right to conduct organized sales of the Class A-1 and A-2 common stock of CBOE Holdings issued in the restructuring transaction when the transfer restriction period applicable to the Class A-1 and A-2 common stock of CBOE Holdings is scheduled to expire. This right will also apply to the Class B common stock because, following any public offering, the Class B common stock will have been automatically converted to Class A-1 and A-2 common stock pursuant to CBOE Holdings' certificate of incorporation. The purpose of this right is to enable CBOE Holdings to facilitate a more orderly distribution of its common stock into the public market.

        If CBOE Holdings elects to conduct an organized sale, no shares of the Class A-1 or A-2 common stock of CBOE Holdings for which transfer restrictions are scheduled to lapse or of any other series that is subject to transfer restrictions may be sold until the 91st day after the later of the expiration of the related transfer restriction period and the completion of the organized sale, except as part of the organized sale or in a permitted transfer.

        For a discussion of organized sales and the procedures to be followed in the event CBOE Holdings determines to conduct an organized sale, please see "Description of CBOE Holdings Capital Stock—Organized Sales" on page 153.

Effect of the Restructuring Transaction on Trading Access (See page 43)

        In the restructuring transaction, all memberships in the CBOE and the trading rights they represent will be cancelled when the CBOE Seats are converted into the right to receive shares of Class A common stock in CBOE Holdings. The CBOE Holdings Class A common stock issued in the restructuring transaction will not provide the holder with any right to physical or electronic access to the CBOE's trading facilities. Following the restructuring transaction, physical and electronic access to the trading facilities of the CBOE, subject to such limitations and requirements as will be specified in the Rules of the CBOE, will be available to individuals and organizations that have obtained a trading permit from the CBOE.

        In addition, effective upon completion of the restructuring transaction, each lease of a CBOE Seat will be voided, and the lessee members will cease to have any rights to trading access under the lease after termination. Current lessees will have the opportunity to apply for a trading permit following the restructuring transaction, which will provide them with physical and/or electronic access to the trading facilities of the CBOE, subject to the limitations and requirements as will be specified in the Rules of the CBOE. For more information regarding trading access following the restructuring transaction, please see "The Restructuring Transaction—Trading Permits" on page 44.

Exercise Right Settlement Agreement (See page 51)

        On August 23, 2006, the CBOE and its directors were sued in the Court of Chancery of the State of Delaware, by the CBOT, CBOT Holdings Inc., the parent corporation of the CBOT, and two members of the CBOT who purported to represent a class of individuals who claim that they were, or had the right to become, members of the CBOE by virtue of the exercise right granted to CBOT members pursuant to paragraph (b) of Article Fifth of the CBOE's certificate of incorporation. We refer in this proxy statement and prospectus to those individuals who claim to have the right to become members of the CBOE pursuant to the exercise right as Exercise Member Claimants. The plaintiffs

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sought a judicial declaration that Exercise Member Claimants were entitled to receive the same consideration in any proposed restructuring transaction involving the CBOE as all other CBOE members, and the plaintiffs also sought an injunction to bar the CBOE and the CBOE's directors from issuing any stock to CBOE members as part of a proposed restructuring transaction, unless the Exercise Member Claimants received the same stock and other consideration as other CBOE members. For more information regarding this litigation, please see "Business—Legal Proceedings—Litigation with Respect to the Restructuring Transaction" on page 106.

        After two years of litigating issues in Delaware, on August 20, 2008, the CBOE entered into a Stipulation of Settlement with the plaintiffs pursuant to which the plaintiffs agreed to dismiss the pending action in Delaware, with prejudice, in exchange for the agreed upon settlement consideration. We refer in this proxy statement and prospectus to the Settlement Agreement entered into among the parties to the Delaware proceeding as the Settlement Agreement. On July 29, 2009, the Delaware Court approved the Settlement Agreement, ruling that it was "fair, reasonable, adequate and in the best interest of the settlement class." As a result, the action in Delaware was dismissed.

        The Participating Group A Settlement Class Members will receive the equity portion of the settlement consideration described below only after the Merger effecting the restructuring transaction is completed. The Participating Group A Settlement Class Members and Participating Group B Settlement Class Members will not receive any consideration in the restructuring transaction or in the Merger effecting the restructuring transaction. As such, the disclosures contained in this proxy statement and prospectus, including those related to the restructuring transaction and the federal income tax consequences of the restructuring transaction, are not intended for, and should not be relied upon by, the Participating Group A Settlement Class Members and the Participating Group B Settlement Class Members. For more information on the Settlement Agreement, please see "The Restructuring Transaction—Exercise Right Settlement Agreement" on page 51.

        The Settlement Agreement calls for a non-opt out settlement class, which means that anyone in the settlement class is bound by the Settlement Agreement and does not have the right to pursue separate claims against the CBOE. The settlement class consists of two groups:

        Under the Settlement Agreement:

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        Pursuant to the Settlement Agreement, the plaintiffs agree that upon final approval of the Settlement Agreement:

8


Our Corporate Structure Before and After the Restructuring

        In order to help you understand the restructuring transaction and how it will affect our corporate organizational structure, the following charts show, in simplified form, the structure of the CBOE before and immediately after the completion of the restructuring transaction:


Before the Restructuring Transaction

GRAPHIC

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Amendments to the CBOE Certificate of Incorporation, Constitution, Bylaws and Rules

        Currently, the CBOE has a certificate of incorporation, Constitution and Rules. The Constitution and Rules of the CBOE are collectively referred to as the bylaws. Following the restructuring transaction, the CBOE's rules will no longer be part of the bylaws and what has been historically referred to as the Constitution, will now be referred to as the bylaws. As a result, following the restructuring transaction, the certificate of incorporation, bylaws and Rules of the CBOE will be similar to the CBOE's current certificate of incorporation, Constitution and Rules, except each of these documents will be revised to reflect that the CBOE will become wholly owned by CBOE Holdings and will be revised in other ways to, among other things, streamline the CBOE governance and incorporate provisions required by the SEC in the case of for-profit exchanges.

        In addition, as part of the restructuring transaction, the certificate of incorporation of the CBOE will be revised to remove Article Fifth(b) as it would no longer be applicable to a demutualized CBOE. In any event, as a result of the CME/CBOT Transaction and as provided in the Settlement Agreement, there no longer are members of the CBOT who qualify to become members of the CBOE under Article Fifth(b). Other revisions to our current certificate of incorporation, Constitution, bylaws and Rules will reflect the way in which access to our trading facilities will be provided following the restructuring. These amendments are described below under the headings "The Restructuring Transaction—Amendments to the CBOE Certificate of Incorporation, Constitution and Bylaws" on page 48 and "The Restructuring Transaction—Amendments to the CBOE Rules" on page 50. For more information regarding the differences between the rights before and after the restructuring transaction, please see "Comparison of Rights Prior to and After the Restructuring Transaction" on page 160.

The CBOE Special Meeting (See page 29)

        The special meeting of the CBOE members will be held in                        at 400 South LaSalle Street, Chicago, Illinois 60605, on                        , 2009 at     :     a.m., local time. You may vote at the CBOE special meeting or any adjournments thereof if you are a Voting Member of the CBOE of record and in good standing as of the close of business on                        , 2009, the record date for the special meeting.

        Proposal to Approve the Restructuring Transaction.    To approve the restructuring transaction, CBOE members holding a majority of the outstanding memberships must approve the Agreement and Plan of Merger.

        Proposal to Adjourn or Postpone the Meeting.    To approve any proposal to adjourn or postpone the meeting, should such a proposal be made at the meeting, CBOE members holding a majority of the memberships present or represented by proxy at the meeting must approve such proposal.

        Other Proposals.    The approval of any other proposal presented at the special meeting requires the affirmative vote of a majority of the votes cast by the CBOE members at the special meeting.

        The CBOE board of directors recommends that the CBOE members vote "FOR" the adoption of the Agreement and Plan of Merger that will effect the restructuring transaction. In addition, the CBOE board of directors recommends that the CBOE members vote "FOR" any proposal that may be made by the Vice Chairman of the Board of Directors of the CBOE to adjourn or postpone the CBOE special meeting for the purpose of soliciting additional proxies with respect to the proposal to adopt the Agreement and Plan of Merger.

Material U.S. Federal Income Tax Consequences (See page 155)

        It is a condition to the obligation of the CBOE to consummate the Merger that it receive an opinion from its counsel, dated as of the closing date of the Merger, to the effect that the Merger will

10



qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code. Subject to the limitations and qualifications described under "Material U.S. Federal Income Tax Consequences," it is the opinion of Schiff Hardin LLP, counsel to the CBOE, that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code. As a result:

        There can be no assurance that the Internal Revenue Service will agree with the conclusions of Schiff Hardin LLP that the Merger constitutes a reorganization for U.S. federal income tax purposes. Because the Participating Group A and Group B Settlement Class Members will not receive any consideration in the restructuring transaction or in the Merger, the tax discussion in this proxy statement and prospectus does not include an analysis of, and no opinion is being provided with respect to, the U.S. federal income tax consequences of the Settlement Agreement or the consideration to be paid to Participating Group A or Group B Settlement Class Members under the Settlement Agreement. The discussion provided in this proxy statement and prospectus, and the opinion of Schiff Hardin, LLP provided herein, is limited to the material U.S. tax consequences of the Merger to U.S. Holders of CBOE Seats. You should read "Material U.S. Federal Income Tax Consequences" for a more complete discussion of the U.S. federal income tax consequences of the Merger. We urge you to consult with your tax advisor for a full understanding of the tax consequences of the Merger to you.

Accounting Treatment

        The restructuring transaction will be treated as a merger of entities under common control. Accordingly, the financial position and results of operations of the CBOE will be included in the consolidated financial statements of CBOE Holdings on the same basis as currently presented.

Regulatory Approvals (See page 55)

        The restructuring transaction is subject to the approval of the SEC to the extent that changes to our certificate of incorporation, Constitution and Rules are necessary to effectuate the restructuring transaction. These changes must be filed with, and in most cases approved by, the SEC before they may become effective. Accordingly, we intend to make appropriate filings with the SEC seeking approval of the proposed restructuring transaction and associated amendments as described in this document. While we believe that we will receive the requisite regulatory approvals from the SEC, there can be no assurances regarding the timing of the approvals or our ability to obtain the approvals on satisfactory terms. Subject to the satisfaction of these conditions, we expect to complete the restructuring transaction in the fourth quarter of 2009 or the first quarter of 2010.

Appraisal Rights (See page 56)

        Under Delaware law, the CBOE members have the right to an appraisal of the fair value of their CBOE Seats in connection with the restructuring transaction. To exercise appraisal rights, a CBOE Voting Member must not vote for adoption of the Agreement and Plan of Merger and must strictly comply with all of the procedures required by Delaware law. These procedures are described more fully in "The Restructuring Transaction—Appraisal Rights of Dissenting Members" on page 56.

        A copy of Delaware General Corporation Law—Section 262—Appraisal Rights—is included as Annex H to this document.

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Directors and Management of CBOE Holdings and the CBOE Following the Restructuring Transaction (See page 121)

        Following the restructuring transaction, the CBOE Holdings board of directors will consist of 23 directors, one of whom will be CBOE Holdings' chief executive officer. At all times, no less than two-thirds of the directors of CBOE Holdings will be independent as defined by CBOE Holdings' board of directors, which definition will satisfy the New York Stock Exchange's or the NASDAQ Stock Market's listing standards for independence. Each director will serve for one-year terms or until his or her successor is elected and qualified. There is no limit on the number of terms a director may serve on the board.

        The CBOE's board of directors also will consist of 23 directors, one of whom will be the CBOE's chief executive officer. At all times, at least 30% of the board shall consist of industry directors, and at all times, at least a majority of the board will consist of non-industry directors. For a description of "non-industry director" and "industry director" and for more information on the specific requirements for the CBOE Holdings and the CBOE boards of directors, please see "Directors and Management of the CBOE and CBOE Holdings After the Restructuring Transaction" on page 121. Each director will serve for one-year terms or until his or her successor is elected and qualified. There is no limit on the number of terms a director may serve on the board.

        The directors serving on the board of directors of the CBOE immediately prior to the restructuring transaction will be the directors of the CBOE and CBOE Holdings immediately following the effectiveness of the restructuring transaction.

        On or prior to the completion of the restructuring transaction, in addition to its current officers, CBOE Holdings will elect certain additional individuals as officers of CBOE Holdings. See "Directors and Management of the CBOE and CBOE Holdings After the Restructuring Transaction."

Stock Exchange Listing and Stock Prices (See page 56)

        CBOE Holdings common stock currently is not traded or quoted on a stock exchange or quotation system. We do not currently intend to list the common stock of CBOE Holdings on any stock exchange immediately following the completion of the restructuring transaction. If CBOE Holdings subsequently pursues a public offering, CBOE Holdings likely would apply to list its common stock at that time. There can be no assurances, however, that a public offering of CBOE Holdings will occur or that the common stock of CBOE Holdings will ultimately be listed on any stock exchange.

        CBOE Seats are not traded or quoted on a stock exchange or quotation system. All transfers of CBOE Seats, including transfers through private sales, currently must be processed through the CBOE. The CBOE records the sale prices of CBOE Seats.

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        Because all transfers of CBOE Seats, including private sales, must be processed through the CBOE membership department, the CBOE is aware of the price of all transfers, including nominal transfers. The following table sets forth, for the periods indicated, the high and low sale prices of CBOE Seats as recorded in the CBOE's records.


Calendar Quarter
  High
  Low

2006:            

First Quarter   $ 1,150,000   $ 850,000

Second Quarter   $ 1,375,000   $ 1,200,000

Third Quarter   $ 1,400,000   $ 975,000

Fourth Quarter   $ 1,775,000   $ 1,375,000


2007:

 

 

 

 

 

 

First Quarter   $ 2,270,000   $ 1,800,000

Second Quarter   $ 2,550,000   $ 2,100,000

Third Quarter   $ 2,700,000   $ 2,350,000

Fourth Quarter   $ 3,150,000   $ 2,650,000

2008:            

First Quarter   $ 3,125,000   $ 2,225,000

Second Quarter   $ 3,300,000   $ 2,650,000

Third Quarter   $ 2,950,000   $ 2,400,000

Fourth Quarter   $ 2,475,000   $ 1,750,000


2009:

 

 

 

 

 

 

First Quarter   $ 1,750,000   $ 1,200,000

Second Quarter   $ 1,900,000   $ 1,500,000

        On January 24, 2007, the day prior to the date of public announcement of the restructuring transaction, the most recent sale price of a CBOE Seat was $1,900,000, and the most recent sale of a CBOE Seat prior to the date of this prospectus was on July 8, 2009, at a price of $1,800,000, in each case as recorded by the CBOE's membership department.

Certain Differences in the Rights of a CBOE Member Before the Restructuring Transaction and a CBOE Holdings Stockholder after the Restructuring Transaction (See page 160)

        Upon completion of the restructuring transaction, CBOE Holdings' certificate of incorporation and bylaws will govern the rights of the CBOE Holdings stockholders. Please read carefully the form of CBOE Holdings certificate of incorporation and bylaws that will be in effect upon completion of the restructuring transaction, copies of which are attached as Annex C and D, respectively, to this proxy statement and prospectus, as well as a summary of the material differences between the rights of the CBOE Holdings stockholders and the CBOE members under "Comparison of Rights Prior to and After the Restructuring Transaction."

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UNAUDITED SUMMARY CONDENSED CONSOLIDATED FINANCIAL DATA

        The following table sets forth a summary of our historical financial and other information. When you read this summary condensed consolidated financial data, it is important that you read along with it the historical financial statements and related notes, as well as the section titled "Selected Consolidated Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this proxy statement and prospectus. In 2004, the CBOE converted from a fiscal year that ended on June 30 to a fiscal year that ends on December 31. Because of this conversion, it was necessary for the CBOE to have a six-month reporting period ending on December 31, 2004.


 
   
   
   
   
   
   
   
   
  Year
Ended

 
 
  Six Mos.
Ended
June 30,
2009

  Six Mos.
Ended
June 30, 2008

  Year
Ended
Dec 31,
2008

  Year
Ended
Dec 31,
2007

  Year
Ended
Dec 31,
2006

  Year
Ended
Dec 31,
2005

  Six Mos.
Ended
Dec 31,
2005

  Six Mos.
Ended
Dec 31, (1)
2004

 
 
  June 30,
2004

 

 
  (dollars in thousands, except per share data)

 

Operating Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Total revenues   $ 207,943   $ 201,890   $ 423,781   $ 352,301   $ 257,986   $ 203,055   $ 105,879   $ 88,926   $ 173,714  
Total expenses     120,061     105,218     230,374     212,350     185,959     183,162     94,662     86,493     171,059  
Income before income taxes     87,882     96,672     193,407     139,951     72,027     19,893     11,217     2,433     2,655  
Income taxes     35,495     40,661     78,119     56,783     29,919     8,998     5,032     1,240     1,004  
Net income   $ 52,387   $ 56,011   $ 115,288   $ 83,168   $ 42,108   $ 10,895   $ 6,185   $ 1,193   $ 1,651  
Balance Sheet Data                                                        
Total assets   $ 553,118   $ 419,194   $ 496,139   $ 341,695   $ 255,826   $ 202,185   $ 202,185   $ 198,967   $ 176,234  
Total liabilities     118,974     96,815     114,479     75,328     72,437     61,277     61,277     64,127     42,587  
Total equity     434,144     322,379     381,660     266,367     183,389     140,908     140,908     134,840     133,647  
Pro forma Data                                                        
Net income (loss) per share (2)     [             ]   [             ]   [             ]   [             ]   [             ]   [             ]   [             ]   [             ]   [            ]  
Other Data                                                        
Current ratio (3)     4.34     3.97     3.97     4.18     2.85     2.59     2.59     2.16     3.02  
Working capital   $ 320,544   $ 227,655   $ 270,297   $ 173,963   $ 94,081   $ 59,912   $ 59,912   $ 42,911   $ 36,788  
Capital expenditures (4)     20,752     16,374     43,816     32,095     28,700     21,011     10,948     15,462     23,334  
Number of full time employees at the end of the period     596     578     576     586     626     673     673     686     698  
Sales price per CBOE Seat                                                        
High   $ 1,900   $ 3,300   $ 3,300   $ 3,150   $ 1,775   $ 875   $ 875   $ 420   $ 340  
Low   $ 1,200   $ 2,225   $ 1,750   $ 1,800   $ 850   $ 299   $ 600   $ 270   $ 190  

      Certain 2008, 2007 and 2006 amounts have been reclassified to conform to current year presentation.

(1)
In 2004, the CBOE converted its fiscal year from the year ending June 30 to the year ending December 31. Because of this transition, the CBOE is reporting results for the six months ending December 31, 2004.

(2)
Based on             shares issued and outstanding immediately following the completion of the restructuring transaction.

(3)
Equals current assets divided by current liabilities.

(4)
Does not include new investments in affiliates or the disposition of interests in affiliates.

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RISK FACTORS

        In this section, we describe the material risks known to us pertaining to the proposed restructuring of the CBOE and to our business in general. You should carefully consider each of the following risks, together with all other information set forth in this document, before deciding whether to vote for or against the proposal to approve the restructuring transaction.

Risks Relating to the Restructuring Transaction

        We are subject to the following risks in connection with the restructuring transaction, including the changes in our form of corporate organization and in our governance structure:

The costs of restructuring and of maintaining a holding company structure may outweigh the benefits intended to be realized by making these changes.

        Although we expect that the proposed restructuring into a holding company form of organization will provide us increased flexibility to raise capital, make acquisitions, form strategic alliances and otherwise to operate in a manner that will allow us to pursue our strategic goals, it is possible that we will not be able to achieve some or all of these benefits as a result of unfavorable market conditions, the regulatory environment or other circumstances. As a result, we could incur the added costs of restructuring and of maintaining a holding company structure without realizing the intended benefits.

We have limited experience in operating as a for-profit exchange.

        From our formation in 1973 until our change to a for-profit business model at the beginning of 2006, we have operated as a member-owned organization essentially on a break-even basis and for the benefit of our members, subject to our obligations as a self-regulatory organization, or SRO, under the Securities Exchange Act of 1934, or the Exchange Act. In that capacity, our business decisions were focused not on maximizing our own profitability but instead on delivering member benefits and enhancing member opportunity at reasonable cost in conformity with our obligations under the Exchange Act. Beginning in 2006 and carrying forward after the restructuring transaction, our business was and will be operated for the long-term benefit of our owners rather than primarily for the purpose of delivering member benefits and enhancing member opportunity. Our management, therefore, has limited experience operating a for-profit business. Consequently, our transition to for-profit operations will be subject to risks, expenses and difficulties that we cannot predict and may not be capable of handling in an efficient manner.

CBOE Holdings has not determined its dividend policy. The ability of CBOE Holdings to pay dividends will depend upon the earnings of its operating subsidiaries to meet obligations and invest appropriately in the business prior to payment of any dividends. Accordingly, there can be no guarantee that CBOE Holdings will, or will be able to, pay dividends to its stockholders.

        Any future decision to pay dividends on CBOE Holdings common stock will be at the discretion of the CBOE Holdings board of directors. The CBOE Holdings board of directors may or may not determine to declare dividends in the future. The board's determination to issue dividends will depend upon the profitability and financial condition of CBOE Holdings and its subsidiaries, contractual restrictions, restrictions imposed by applicable law and the SEC and other factors that the CBOE Holdings board of directors deems relevant. As a holding company with no significant business operations of its own, CBOE Holdings will depend entirely on distributions, if any, it may receive from its subsidiaries to meet its obligations and pay dividends to its stockholders. If these subsidiaries are not profitable, or even if they are and they determine to retain their profits for use in their businesses, CBOE Holdings will be unable to pay dividends to its stockholders. We are not now able to state what will be the long-term dividend policy adopted by CBOE Holdings' board of directors.

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We must obtain the approval of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) before we can complete the proposed restructuring transaction, which may result in additional conditions being imposed and may be a source of delay.

        The SEC must approve the proposed amendments to the CBOE's certificate of incorporation, Constitution and Rules as well as certain terms of the certificate of incorporation and bylaws of CBOE Holdings, in each case, that result from or are a part of the restructuring transaction. SEC approval might not be forthcoming in a timely manner or may be conditioned on changes to these documents that could limit or otherwise adversely affect your rights as holders of CBOE Holdings common stock after the restructuring. Certain changes may require us to obtain the approval of the CBOE members even if we have already received membership approval to complete the restructuring as originally proposed. This could require us to re-solicit proxies, which could cause us to incur significant additional expenses and delay.

        In addition, we will need to obtain the approval of CFTC for the transfer of our subsidiary CBOE Futures Exchange, LLC from the CBOE to CBOE Holdings. This approval could delay our ability to consummate the restructuring transaction.

The Class A common stock of CBOE Holdings you receive in the restructuring transaction will not be listed on a national securities exchange and will not be a liquid investment unless an active marketplace develops.

        The shares of Class A common stock that you will receive in the restructuring transaction will not be listed on a national securities exchange. In addition, the shares you will receive will only be permitted to be traded through the agent that has been designated by CBOE Holdings to manage such transfers and through the broker or market designated by CBOE Holdings as the sole broker or market for such transfers. Accordingly, unless this market develops into an active marketplace for our common stock, you will be required to bear the risk of your investment in these shares for an extended period of time.

A public offering of our common stock may never be completed.

        There can be no guarantee that there will be a future public offering of common stock of CBOE Holdings. Whether or not our board of directors determines to proceed with public offering will depend on many factors, including market conditions, the trading performance of and investor demand for the equity of comparable companies and our operating performance relative to comparable companies. We may not be able to complete a public offering in the near future or at all. Even if a public offering is completed, the price you would be able to receive for the shares you receive in the restructuring transaction may be less than the current market value of your CBOE Seat.

Prior to and following a public offering, if any, shares of CBOE Holdings Class A common stock will be subject to transfer restrictions and will not be a liquid investment until these restrictions lapse.

        Because the Class A common stock of CBOE Holdings issued in the restructuring transaction would become subject to transfer restrictions upon public announcement by the board of CBOE Holdings to institute such restrictions, and because the shares will continue to be subject to such transfer restrictions in the event CBOE Holdings concludes a public offering, these shares will not be a liquid investment until such transfer restrictions have expired and a trading market in the shares has developed. Identical transfer restrictions will apply to the Class B common stock issued in connection with the Settlement Agreement. Even if a market in shares of CBOE Holdings common stock does develop, the market price of the stock may fluctuate due to actual or anticipated variations in the operating results of CBOE Holdings and its subsidiaries and as a result of conditions or trends in the businesses in which CBOE Holdings and its subsidiaries are engaged, including regulatory, competitive

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or other developments affecting only CBOE Holdings or its subsidiaries or affecting financial markets in general.

Your ownership of CBOE Holdings may be diluted if additional capital stock is issued to raise capital, to finance acquisitions or in connection with strategic relationships.

        CBOE Holdings may seek to raise additional funds, finance acquisitions or develop strategic relationships by issuing equity or convertible debt securities, which would reduce the percentage ownership of existing CBOE Holdings stockholders. Following the restructuring transaction, the CBOE Holdings board of directors will have the authority, without action or vote of the stockholders, to issue all or any part of our authorized but unissued shares of common or preferred stock. Our certificate of incorporation authorizes 300,000,000 shares of common stock and 20,000,000 shares of preferred stock. Following the restructuring transaction and the issuance of the Class B common stock under the Settlement Agreement, to the Participating Group A Settlement Class Members,            shares of common stock and 20,000,000 shares of preferred stock will be authorized and unissued. Issuance of common or preferred stock would reduce your influence over matters on which stockholders vote and would be dilutive to earnings.

        In addition, any newly issued preferred stock could have rights, preferences and privileges senior to those of the CBOE Holdings common stock. Those rights, preferences and privileges could include, among other things, the establishment of dividends which must be paid prior to declaring or paying dividends or other distributions to holders of our common stock, greater or preferential liquidation rights which could negatively affect the rights of holders of our common stock and the right to convert such preferred stock into shares of our common at a rate or price which would have a dilutive effect on the outstanding shares of our common stock.

The CBOE may not be able to generate significant revenue by making trading access available in exchange for a fee paid directly to the CBOE, rather than having access be an attribute of a CBOE Seat.

        The ability to trade on the CBOE is currently an inherent right of every CBOE member. One of the consequences of the restructuring transaction will be to separate trading access from ownership and thereby eliminate access as an inherent right of ownership of the CBOE. Upon the effectiveness of the restructuring transaction, the right to trade on the CBOE will be made available to holders of trading permits issued by the CBOE that will be subject to fees paid directly to the CBOE. These fees are expected to account for a significant portion of the revenues of the CBOE, hence of CBOE Holdings. If the demand for access to the CBOE is less than planned, we would not likely be able to generate as much revenue as we anticipate through the granting of permits for trading access, which could adversely affect the profitability of the CBOE and CBOE Holdings. For a discussion of trading access after the restructuring transaction, please see "The Restructuring Transaction—Effect of the Restructuring Transaction on Trading Access" on page 43.

We are a party to a pending lawsuit in connection with the restructuring transaction which could delay or affect the structure of the restructuring transaction.

        On August 23, 2006, the CBOE and its directors were sued by The Board of Trade of the City of Chicago, Inc. (the "CBOT"), CBOT Holdings, Inc. ("CBOT Holdings," the CBOT's parent company) and two members of the CBOT who purport to represent a class of individuals who became, or had the right to become, members of the CBOE, without paying for such membership, by virtue of the Exercise Right granted to CBOT members pursuant to paragraph (b) of Article Fifth of the CBOE's certificate of incorporation. On August 20, 2008, the CBOE entered into a Stipulation of Settlement with the plaintiffs pursuant to which the plaintiffs agreed to dismiss the pending suit, with prejudice, in exchange for agreed upon settlement consideration. For more information on the Settlement Agreement, please see "The Restructuring Transaction—Exercise Right Settlement Agreement" on page 51. In the suit,

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the plaintiffs sought a judicial declaration that, among other things, persons who became CBOE members pursuant to the Exercise Right ("Exercise Member Claimants"), were entitled to receive the same consideration in the CBOE's restructuring transaction as all other CBOE members, and plaintiffs also sought an injunction to bar the CBOE and the CBOE's directors from issuing any stock to CBOE members as part of the restructuring transaction unless Exercise Member Claimants received the same stock and other consideration as other CBOE members. Plaintiffs also sought a declaratory judgment and an injunction to prevent the CBOE from implementing an interpretation of Article Fifth(b) of the CBOE's certificate of incorporation that the SEC has approved, under which no person qualifies as an Exercise Member Claimant following the consummation of the CME/CBOT Transaction. The Delaware court has approved the Settlement Agreement and issued a final order dismissing the case on July 29, 2009. The approval of the Settlement Agreement and the court's dismissal order are subject to appeal. Any such appeal could delay or affect the structure of the restructuring transaction as well as lead to additional expenses or require us to issue more equity, which would dilute materially the equity of our stockholders. Prior to this action we have been subject to other legal proceedings and claims relating to the Exercise Right. It is possible that other claims could be brought in the future relating to the restructuring transaction or other matters, which could likewise delay or affect the structure of the restructuring transaction and lead to additional expenses or require us to issue more equity, which would dilute materially the equity of our stockholders. See "Business—Legal Proceedings—Litigation with respect to the Restructuring Transaction" on page 106 for a description of this litigation.

Risks Relating to Our Business

        Our business, and thus the value of CBOE Holdings common stock, is subject to the following risks, which include risks relating to the industry in which we operate.

The CBOE operates in a highly regulated industry and may be subject to censures, fines and other legal proceedings if it fails to comply with its legal and regulatory obligations.

        The CBOE, which will be CBOE Holdings' principal operating subsidiary, is a registered national securities exchange and an SRO and, as such, is subject to comprehensive regulation by the SEC. The CBOE's ability to comply with applicable laws and rules is largely dependent on its establishment and maintenance of appropriate systems and procedures, as well as its ability to attract and retain qualified personnel. The SEC has broad powers to audit, investigate and enforce compliance and to punish noncompliance by SROs with the Exchange Act, the SEC's rules and regulations under the Exchange Act and the rules and regulations of the SRO. If the SEC were to find the CBOE's program of enforcement and compliance to be deficient, the CBOE could be the subject of SEC investigations and enforcement proceedings that may result in substantial sanctions, including revocation of its registration as a national securities exchange. Any such investigations or proceedings, whether successful or unsuccessful, could result in substantial costs and diversions of resources and potential harm to the CBOE's reputation, any of which could have a material adverse effect on the business, financial condition and operating results of CBOE Holdings.

        Although CBOE Holdings itself will not be a registered entity, CBOE Holdings will be subject to regulation by the SEC over its activities that involve the CBOE because CBOE Holdings will control the CBOE, which is an SRO. Specifically, the SEC will exercise oversight over the governance of CBOE Holdings and its relationship with the CBOE. See "Regulation—Regulatory Responsibilities" on page 112.

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The listed options model depends on a national market structure that facilitates the efficient buying and selling of underlying stock, futures and other products. Any significant change to the underlying market model, such as the proposed rulemaking of the SEC related to short sales, could materially impact the ability of the CBOE's users to conduct business.

        The CBOE's members and customers were, to differing extents, impacted by the actions of the SEC in September 2008 to restrict short selling of certain financial stocks. While this SEC emergency order has expired, provisions in other SEC emergency orders related to short selling have been made permanent and could impact the use of options by both members and customers. For a description of the SEC's proposed rulemaking related to short sales, please see "Regulation—Recent Regulatory Developments" on page 115. More recently the SEC has stated its intention to examine the impact of "flash orders" on the price discovery process in securities markets. We cannot predict what action the SEC might take as a result of this examination or what effect it might have on the options industry or CBOE's business.

As a regulated entity, CBOE's ability to implement or amend rules could be limited or delayed, which could negatively affect its ability to implement needed changes.

        The CBOE must submit proposed rule changes to the SEC for its review and, in many cases, its approval. Even where a proposed rule change may be put into effect upon its being filed with the SEC, the SEC retains the right to abrogate such rule changes. The SEC review process can be lengthy and can significantly delay the implementation of proposed rule changes that the CBOE believes are necessary in the operation of its market. If the SEC refuses to approve a proposed rule change or delays its approval, this could negatively affect the ability of the CBOE to make needed changes or implement business decisions.

Intense competition could materially adversely affect our market share and financial performance.

        The options industry is highly competitive. Competition among options exchanges has continued to expand since the CBOE was created in 1973. We currently face greater competition than ever before in our history, not only because virtually all of the equity and ETF options listed and traded on the CBOE are also listed and traded on other U.S. options exchanges. Some order-providing firms have taken ownership positions in options exchanges that compete with us, thereby giving those firms an added incentive to direct orders to the exchanges they own. As a result of these competitive developments, although our trading volume has increased in absolute terms in recent years, our market share of equity options traded in the United States fell from approximately 44% in 1999 to about 31% for the first six months of 2009.

        In response to these developments, we developed our own electronic trading facility that we operate as part of a "hybrid" model, combining electronic trading and remote off-floor market-makers with traditional floor-based, open outcry trading. We have also administered a program through which we collect a marketing fee on market maker transactions. The funds collected are made available to the specialist and preferred market-makers for use in payment for order flow. These changes to our hybrid trading model have proven to be successful in maintaining and expanding our market share. These changes, however, may not be successful in maintaining or expanding our market share in the future. Likewise, our future responses to these or other competitive developments may not be successful in maintaining or expanding our market share.

CBOE's business may be adversely affected by price competition.

        The business of operating an options exchange is characterized by intense price competition. The pricing model for trade execution for options has changed in response to competitive market conditions. Some of the CBOE's competitors have lowered their transaction fees while at the same

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time increasing the marketing fees that they collect from market makers and make available to specialists for use in paying for order flow. Other competitors have introduced a market model in which orders that take liquidity from the market are charged a transaction fee and orders that provide liquidity receive a rebate. These changes have resulted in significant pricing and cost pressures on the CBOE and its members. It is likely that this pressure will continue and even intensify as our competitors continue to seek to increase their share of trading by further reducing their transaction fees and by offering higher payments or other financial incentives to order providers and liquidity providers to induce them to direct orders to our competitors' markets. In any of these events, the CBOE's operating results and profitability could be adversely affected, which in turn would affect the profitability of CBOE Holdings. For example, the CBOE could lose a substantial percentage of its share of trading if it is unable to price its transactions in a competitive manner. Also, the CBOE's profit margins could decline if competitive pressures force it to reduce its fees.

We may not be able to protect our intellectual property rights.

        We rely on patent, trade secret, copyright and trademark laws, the law of the doctrine of misappropriation and contractual protections to protect our proprietary technology, proprietary index products and index methodologies and other proprietary rights. In addition, we rely on the intellectual property rights of our licensors in connection with our trading of exclusively-licensed index products. We and our licensors may not be able to prevent third parties from copying, or otherwise obtaining and using, our proprietary technology without authorization or from trading our proprietary or exclusively-licensed index products without licenses or otherwise infringing on our rights. We and our licensors may have to rely on litigation to enforce our intellectual property rights, determine the validity and scope of the proprietary rights of others or defend against claims of infringement or invalidity. We and our licensors may not be successful in this regard. In any event, any such litigation, whether successful or unsuccessful, could result in substantial costs to us and diversions of our resources, either of which could materially adversely affect our business. For a description of current litigation involving these matters, please see "Business—Legal Proceedings" on page 106.

Loss of our market share in the index options we trade or the loss of our exclusive licenses to trade certain index options could have a material adverse effect on our financial performance.

        A significant contribution to the CBOE's revenue and profitability comes as a result of our market share in broad-based index options. Our market share in these products results in part because we hold exclusive licenses to trade index options granted to us by the owners of the S&P 500 Index and S&P 100 Index and the Dow Jones Industrial Average, or DJIA. However, even these index options face competition from other indexed derivatives, such as index futures traded on futures exchanges, indexed exchange-traded funds, or ETFs, options on ETFs and futures on ETFs and various over-the-counter options, swaps and other derivatives, some of which may be used by investors to achieve the same or similar purposes as the options we trade.

        In addition, the value of our exclusive licenses to trade index options depends on the continued ability of index owners to require licenses for the trading of options based on their indexes. Although recent court decisions have allowed the trading of options overlying ETFs based on indexes without licenses from the owners of the indexes, none of these decisions has overturned existing legal precedent that requires an exchange to be licensed by the owner of an index before it may trade options overlaying on the index. However, in pending litigation between International Securities Exchange, Inc., or ISE, and the CBOE and the owners of the S&P 500 Index and the DJIA—two of the most popular indexes on which the CBOE trades options pursuant to exclusive licenses—ISE seeks a judicial declaration that it (and, by extension, other options exchanges) has the right to list and trade options overlaying those indexes without licenses and, therefore, without regard to the CBOE's exclusive licenses to trade options on those indexes. This litigation remains pending, and there is a risk that ISE

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may be successful in eliminating the right of index owners to require licenses to use their indexes for options trading, including on an exclusive basis. There is also a risk that competing exchanges may convince the SEC to limit the right of index owners to grant exclusive licenses for index options trading or to prevent exchanges from entering into such exclusive licenses. If unlicensed trading of index options were permitted or if exclusive licenses for index options trading were prohibited, the value of the CBOE's exclusive licenses to trade index options would be eliminated, and the CBOE likely would lose some market share in these index options. There is also a risk, with respect to each of our current exclusive licenses, that the owner of the index may determine not to renew the license on an exclusive basis, or not to renew it at all, upon the expiration of the current term. In the first event, we would be subject to competition in the trading of what is now an exclusive index product, resulting in a likely reduction of the profitability to the CBOE of trading the product. In the second event, we could lose the right to trade the index product entirely.

Our decision to operate both open outcry trading and electronic trading systems may have a material adverse effect on our operating costs, markets and profitability.

        Our current business strategy involves the operation of a hybrid trading system that includes both floor-based, or open outcry, trading and electronic trading for most of our products. It is expensive to continue operating both electronic and floor-based markets for the same products. This may result in resource allocation decisions that adversely impact one or both systems and put us at a competitive disadvantage to other exchanges. If we determine to continue to operate both systems without reducing the resources provided to either one, the costs of doing so could reduce our profitability.

Our decision to operate a second marketplace may have a material adverse effect on our operating costs and profitability.

        Our current business strategy involves the operation of a second exchange, currently referred to as "C2." This second exchange will operate separately from CBOE with its own governance structure and systems. C2 will be located in the New York City metropolitan area, will operate as an electronic marketplace and will be capable of listing all of CBOE's products. In addition, C2 will serve as a back-up facility for CBOE.

        The CBOE is spending substantial funds on the development of C2. Despite these expenditures, C2 could fail to be launched if, for instance, the SEC does not approve C2 as a new exchange or does not approve the market model under which CBOE elects to operate C2. Even if C2 is launched, it may be unable to generate sufficient transaction volume and cash flow to meet its obligations. It also is possible that member firms may choose not to connect to C2, for instance, because they may conclude that doing so will not attract sufficient order flow to justify the cost of connecting. A failure of C2 as an exchange could result in CBOE Holdings writing off some portion of its investment in C2's development. On the other hand, if C2 is successful, it could cause a shift of business from CBOE to the C2 platform, making it difficult to maintain CBOE access revenue at current levels.

We may be unable to keep up with rapid technological changes.

        To remain competitive, we must continue to enhance and improve the responsiveness, functionality, accessibility and features of our automated trading and communications systems in the face of rapid technological change, changes in use and customer requirements and preferences, frequent product and service introductions embodying new technologies and the emergence of new industry standards and practices. This will require us to continue to attract and retain a highly-skilled technology staff and invest the financial resources necessary to keep our systems up to date. If we fail to do so, our systems could become obsolete, which could result in the loss of customers and volume and have a material adverse effect on the business, financial condition and operating results of the CBOE and CBOE Holdings.

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Computer and communications systems failures and capacity constraints could harm our reputation and our business.

        We are committed to operate, monitor or maintain our computer systems and network services, including those systems and services related to our electronic trading system in a secure and reliable manner. A failure to do so could have a material adverse effect on the functionality and reliability of our market and, hence, on our reputation, business, financial condition and operating results. System failure or degradation could lead our customers to file formal complaints with industry regulatory organizations, file lawsuits against us or cease doing business with us or could lead other regulators to initiate inquiries or proceedings for failure to comply with applicable laws and regulations.

The computer systems and communication networks upon which we rely in the operation of our exchange may be vulnerable to security risks and other disruptions.

        The secure and reliable operation of our computer systems and of our own communications networks and those of our service providers, our members and our customers is a critical element of our operations. These systems and communications networks may be vulnerable to unauthorized access, computer viruses and other security problems, as well as to acts of terrorism, natural disasters and other events of force majeure. If our security measures are compromised or if there are interruptions or malfunctions in our systems or communications networks, this could have a material adverse effect on our business, financial condition and operating results. We may be required to expend significant resources to protect against the threat of security breaches or to alleviate problems, including harm to reputation and litigation, caused by any breaches in security or system failures. Although we intend to continue to implement industry-standard security measures and otherwise to provide for the integrity and reliability of our systems, these measures may prove to be inadequate in preventing system failures or delays in our systems or communications networks that could lower trading volume and have a material adverse effect on our business, financial condition and operating results.

Our market data fees may be reduced or eliminated due to a decline in our market share, regulatory action or a reduction in the numbers of market data users.

        We obtain substantial revenues from our share of the revenues collected by the Options Price Reporting Authority, or OPRA, for the dissemination of options market data. If our share of options trading were to decline, our share of OPRA market data revenue would also decline. Market data revenue could also decline as a result of a reduction in the numbers of market data users, for example because of consolidation among market data subscribers. Finally, the SEC could take regulatory action to revise the formula for allocating options market data revenues among the options exchanges as it did in 2005 when it adopted Regulation NMS in respect of market data revenue in the stock market, or it could take other regulatory action, and any such action could have the effect either of reducing total options market data revenue or our share of that revenue. Any significant decline in the revenue we realize from the dissemination of market data could materially adversely affect the profitability of the CBOE and CBOE Holdings.

Market fluctuations and other risks beyond CBOE Holdings' control could significantly reduce demand for our services and harm our business.

        The volume of options transactions and the demand for CBOE Holdings' subsidiaries' other products and services are directly affected by economic, political and market conditions in the United States and elsewhere in the world that are beyond our control, including:

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        General economic conditions affect options trading in a variety of ways, from influencing availability of capital to affecting investor confidence. The economic climate in recent years has been characterized by challenging business, economic and political conditions throughout the world. Adverse changes in the economy can have a negative impact on the CBOE's revenues by causing a decline in trading volume or in the demand for options market data. Because the CBOE's management structure and overhead will be based on assumptions of certain levels of market activity, significant declines in trading volumes or demand for market data may have a material adverse effect on the business, financial condition and operating results of the CBOE and of CBOE Holdings.

        A significant portion of CBOE Holdings' revenues will depend, either directly or indirectly, on our transaction-based business, which, in turn, is dependent on our ability to attract and maintain order flow, both in absolute terms and relative to other market centers. If the amount of trading volume on the CBOE decreases, CBOE Holdings' revenue from transaction fees will decrease. There may also be a reduction in revenue from market data fees or other sources of revenue. If the CBOE's share of total trading volumes decreases relative to our competitors, it may be less attractive to market participants and may lose trading volume and associated transaction fees and market data fees as a result. In addition, declines in the CBOE's share of trading volume could adversely affect the growth, viability and importance of several of our market information products, which will constitute an important portion of CBOE Holdings' revenues.

        The financial services industry and particularly the options and futures business are dynamic and uncertain environments, and we expect a highly competitive environment, as well as exchange consolidation and member firm consolidation in the future. This environment has encouraged the introduction of alternative trading venues with varying market structures and new business models. Well-capitalized competitors from outside the United States may seek to expand their operations in the U.S. market. In addition, the financial services industry is subject to extensive regulation, which may change dramatically in ways that affect industry market structure. If the CBOE is unable to adjust to structural changes within our markets, technological and financial innovation, and other competitive factors, the business will suffer and competitors will take advantage of opportunities to our detriment.

Risks Relating to Regulation and Litigation

        We are subject to the following risks in connection with the regulation of, and litigation relating to, our business.

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We may not be able to maintain our self-regulatory responsibilities.

        Some financial services regulators have publicly stated their concerns about the ability of a securities exchange, organized as a for-profit corporation, to adequately discharge its self-regulatory responsibilities. Our regulatory programs and capabilities contribute significantly to our brand name and reputation. In the future we may be required to modify or restructure our regulatory functions in order to address these or other concerns. Any such modifications or restructuring of our regulatory functions could entail material costs for which we have not currently planned.

Damage to the reputation of the CBOE could have a material adverse effect on the businesses of CBOE Holdings.

        One of our competitive strengths is our strong reputation and brand name. This reputation could be harmed in many different ways, including by regulatory failures, governance failures or technology failures. Damage to the reputation of the CBOE could adversely affect our ability to attract liquidity providers and order flow, which in turn could impair the competitiveness of our market. This, in turn, may have a material adverse effect on the business, financial condition and operating results of CBOE Holdings.

We are subject to significant risks of litigation.

        Many aspects of our business involve substantial risks of liability. For example, dissatisfied customers may make claims regarding quality of trade execution, improperly settled trades, mismanagement or even fraud against their brokers. We may become subject to these claims as the result of failures or malfunctions, or alleged failures or malfunctions, of systems and services provided by us. We could incur significant legal expenses defending claims, even those without merit. An adverse resolution of any lawsuits or claims against us could have a material adverse effect on our reputation, business, financial condition and/or operating results. We are currently subject to various litigation matters. For a discussion of litigation involving the CBOE, please see "Business—Legal Proceedings" on page 106.

Any infringement by us on patent rights of others could result in litigation and could have a material adverse effect on our operations.

        Our competitors as well as other companies and individuals may have obtained, and may be expected to obtain in the future, patents that concern products or services related to the types of products and services we offer or plan to offer. We might not be aware of all patents containing claims that may pose a risk of infringement by our products, services or technologies. Claims of infringement are not uncommon in our industry. For instance, in a lawsuit filed on November 22, 2006, ISE claims that the CBOE's hybrid trading system infringes ISE's patent directed towards an automated exchange for trading derivative securities. If our hybrid trading system or one or more of our other products, services or technologies were determined to infringe a patent held by another party, we might be required to stop developing or marketing those products, services or technologies, to obtain a license to develop and market those services from the holders of the patents or to redesign those products, services or technologies in such a way as to avoid infringing the patent. If we were unable to obtain these licenses, we might not be able to redesign our products, services or technologies to avoid infringement, which could materially adversely affect our business, financial condition and operating results. For a discussion of patent litigation involving the CBOE, please see "Business—Legal Proceedings—Patent Litigation" on page 110.

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Member misconduct could harm us and is difficult to detect.

        Although we perform significant self-regulatory functions, we run the risk that the members of the CBOE, other persons who use our markets or our employees will engage in fraud or other misconduct, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to deter misconduct, and the precautions we take to prevent and detect this activity may not be effective in all cases.

Risks Relating to Changes in Our Corporate Governance Structure

        The following risks relate to the significant changes to our corporate governance structure that will occur as part of the restructuring transaction.

CBOE Holdings stockholders will have reduced influence in the day-to-day management and operation of our business from that enjoyed by former members.

        If we complete the restructuring transaction, the CBOE Holdings stockholders will have less ability to influence the day-to-day management and operation of our business than our members currently do. Holders of CBOE Holdings common stock will not be stockholders of the CBOE and will not, therefore, have any vote with respect to matters acted on at the CBOE. CBOE Holdings, as the holder of all of the outstanding stock of the CBOE, will have the sole right to vote on all matters affecting the CBOE, such as any proposal to merge the CBOE with a third party, to sell a significant amount of the CBOE assets to a third party, to cause the CBOE to acquire, invest in or enter into a business in competition with the then existing business of the CBOE or to dissolve or liquidate the CBOE.

        In addition to these changes to voting rights and the manner of amending the certificate of incorporation and bylaws of CBOE Holdings, we will be making changes to the classified structure of our board of directors and the manner in which directors are nominated. Also, we will eliminate the ability of our members to take action by written consent.

        Collectively, these changes will reduce the influence of our members and may lead to decisions and outcomes that differ from those made under our current certificate of incorporation, Constitution, Rules and regulations. Moreover, additional changes to our corporate governance and capital structure may be required upon the occurrence of a public offering of CBOE Holdings which could reduce even further the influence of holders of CBOE Holdings stock.

Effects of certain provisions in the CBOE and CBOE Holdings organizational documents could enable the board of directors of CBOE Holdings to prevent or delay a change of control.

        Following the restructuring, CBOE Holdings' organizational documents will contain provisions that may have the effect of discouraging, delaying or preventing a change of control of, or unsolicited acquisition proposals for, CBOE Holdings that a stockholder might consider favorable. These include provisions:

        In addition, CBOE Holdings' organizational documents will include provisions that:

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        For a more detailed description of these provisions, see "Description of CBOE Holdings Capital Stock" on page 146, as well as the form of CBOE Holdings certificate of incorporation and bylaws attached as Annexes C and D, respectively, to this document.

        Furthermore, the CBOE Holdings board of directors has the authority to issue shares of preferred stock in one or more series and to fix the rights and preferences of these shares without stockholder approval. Any series of CBOE Holdings preferred stock is likely to be senior to the CBOE Holdings common stock with respect to dividends, liquidation rights and, possibly, voting rights. The ability of the CBOE Holdings board of directors to issue preferred stock also could have the effect of discouraging unsolicited acquisition proposals, thus adversely affecting the market price of the common stock.

        In addition, Delaware law makes it difficult for stockholders that recently have acquired a large interest in a corporation to cause the merger or acquisition of the corporation against the directors' wishes. Under Section 203 of the Delaware General Corporation Law, a Delaware corporation may not engage in any merger or other business combination with an interested stockholder for a period of three years following the date that the stockholder became an interested stockholder except in limited circumstances, including by approval of the corporation's board of directors.

        Certain aspects of the certificate of incorporation, bylaws and structure of CBOE Holdings and its subsidiaries will be subject to SEC oversight. See "Regulation" on page 111.

If CBOE Holdings is unable to favorably assess the effectiveness of its internal controls over financial reporting, or if its Independent Registered Public Accounting Firm is unable to provide an unqualified attestation report on CBOE Holdings' assessment, the stock price of CBOE Holdings could be adversely affected.

        The rules governing Sections 302 and 404 of the Sarbanes-Oxley Act of 2002 that must be met for management to assess CBOE Holdings' internal controls over financial reporting are new and complex, and require significant documentation, testing and possible remediation. The CBOE currently is in the process of reviewing, documenting and testing its internal controls over financial reporting. The continuing effort to comply with regulatory requirements relating to internal controls will likely cause us to incur increased expenses and will cause a diversion of management's time and other internal resources. We also may encounter problems or delays in completing the implementation of any changes necessary to make a favorable assessment of our internal controls over financial reporting. In addition, in connection with the attestation process by CBOE Holdings' Independent Registered Public Accounting Firm, CBOE Holdings may encounter problems or delays in completing the implementation of any requested improvements or receiving a favorable attestation. If CBOE Holdings cannot favorably assess the effectiveness of its internal controls over financial reporting, or if its Independent Registered Public Accounting Firm is unable to provide an unqualified attestation report on its assessment, investor confidence and the stock price of CBOE Holdings common stock could be adversely affected.

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FORWARD-LOOKING STATEMENTS

        We make forward-looking statements under the "Summary," "Risk Factors," "Information About the CBOE," "Information About CBOE Holdings," "CBOE Management's Discussion and Analysis of Financial Condition and Results of Operations," and in other sections of this document, as well as in other documents and sources of information that may be made a part of this document by appearing in other documents that we file with the SEC and incorporated by reference into this document. These statements may include statements regarding the period following completion of the restructuring transaction. In some cases, you can identify these statements by forward-looking words such as "may," "might," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," and the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. In particular, you should consider the numerous risks and uncertainties described under "Risk Factors."

        While we believe we have identified material risks, these risks and uncertainties are not exhaustive. Other sections of this document describe additional factors that could adversely impact our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible to predict all risks and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

        Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We are under no duty to update any of these forward-looking statements after the date of this document to conform our prior statements to actual results or revised expectations, and we do not intend to do so.

        Forward-looking statements include, but are not limited to, statements about:

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        We caution you not to place undue reliance on the forward-looking statements, which speak only as of the date of this document in the case of forward-looking statements contained in this document, or the dates of the documents incorporated by reference into this document in the case of forward-looking statements made in those incorporated documents.

        WE EXPRESSLY QUALIFY IN THEIR ENTIRETY ALL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE CBOE OR CBOE HOLDINGS OR ANY PERSON ACTING ON OUR BEHALF BY THE CAUTIONARY STATEMENTS CONTAINED OR REFERRED TO IN THIS SECTION.

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SPECIAL MEETING OF CBOE MEMBERS

Time, Place and Purpose of the CBOE Special Meeting

        The special meeting of the CBOE members will be held in the            at 400 South LaSalle Street, Chicago, Illinois 60605, on                        , 2009 at    :     a.m., local time, for the following purposes:

        The CBOE board of directors recommends that you vote "for" the adoption of the Agreement and Plan of Merger to accomplish the restructuring transaction and for any proposal that may be made by the Vice Chairman of the Board of the CBOE to adjourn or postpone the CBOE special meeting for the purpose of soliciting proxies.

Who Can Vote at the CBOE Special Meeting

        Each Voting Member of the CBOE of record and in good standing as of the close of business on                        , 2009, the record date for the meeting, will be entitled to vote on the matters presented at the meeting and at any adjournment thereof. On each proposal set forth at the CBOE special meeting, each Voting Member of the CBOE is entitled to one vote with respect to each membership for which the Voting Member has the right to vote. As of the date of this document, there are 1,042 total memberships entitled to vote. The CBOE currently holds one inactive "treasury" membership. This membership will not be voted and will not be converted into the demutualization consideration. This membership is not included in the 1,042 memberships referenced above.

Vote Required

        The proposal to adopt the Agreement and Plan of Merger requires the affirmative vote of a majority of the outstanding CBOE memberships. As a result, if a CBOE member does not vote or abstains from voting on this proposal, it will have the same effect as a vote against the proposal.

        The presence in person or by proxy of CBOE members holding a majority of the total outstanding CBOE memberships shall constitute a quorum at the meeting.

        Directors and officers of the CBOE hold memberships entitling them to cast an aggregate of 14 votes on the proposal, representing approximately 1.34% of the total membership votes that may be cast.

Adjournments

        If no quorum of the CBOE members is present at the CBOE special meeting, the CBOE special meeting may be adjourned by the majority of the members present and entitled to vote at that meeting from time to time, without notice other than announcement at the meeting, unless otherwise required by statute. If the Vice Chairman of the CBOE board of directors proposes to adjourn the CBOE special meeting and this proposal is approved by the CBOE members, the CBOE special meeting will be adjourned. At any adjourned meeting of the special meeting at which a quorum is present, any business may be transacted which might have been transacted at the special meeting as originally notified. In order for the special meeting to be adjourned, the proposal to adjourn the meeting must be

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approved by the majority of the members present or represented by proxy at the meeting and entitled to vote.

Manner of Voting

        If you are a Voting Member of the CBOE, you may cast your ballot for or against the proposals submitted at the CBOE special meeting either in person at the meeting or by proxy prior to the time the meeting is called. To vote in person, you must be present at the special meeting and cast your ballot.

        The Election Committee (or their designees) will collect ballots in-person on the trading floor beginning            ,            , 2009. Two voting stations will be set up on the trading floor—near the escalators on the North and South walls (or at such other location as the Election Committee may designate).

        To vote by proxy, and avoid the inconvenience of in-person voting at the Special Meeting, you may submit your ballot along with your proxy to cast your ballot on your behalf at any time prior to the time the special meeting is called to order. The following materials are enclosed with this proxy statement and prospectus: a ballot, proxy card and a postage paid return envelope. You may submit your ballot (along with your proxy to cast your ballot on your behalf) by mail in the postage paid envelope, by fax or hand delivery to the Office of the Secretary on the 7th floor of the Exchange, or you can submit your ballot and proxy through the Internet or by telephone. When voting by proxy, your ballot indicates how you are voting on the proposals at issue, and the proxy authorizes a designated person to place your ballot in the ballot box at the meeting and to vote on your behalf on any other matters that may properly come before the meeting.

        The following is a detailed description of how to vote by proxy using the telephone, Internet and mail methods:

By Telephone (Available only until 3:30 p.m. Central Standard Time on            , 2009.)

By Internet (Available only until 3:30 p.m. Central Standard Time on            , 2009.)

By Mail

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        Members are encouraged to submit the ballot promptly in order to ensure timely receipt and an efficient election. You may verify receipt of your ballot at the voting stations on the trading floor or by contacting                        at                         or Jaime Galvan at (312) 786-7058 (galvanj@cboe.com).

        Upon completion of the vote count, the vote results will be posted on the Member's website at www.CBOE.com and on the Election Results Hotline at (312) 786-8150.

        Ballots, along with a duly executed proxy authorizing the persons designated herein to cast such ballot at the special meeting, must be received prior to     p.m., Central Time, on            , 2009 in order to be counted.

        All ballots (including those given by phone or through the Internet) received before the deadline stated above or by any later established deadline for any adjourned meeting, as the case may be, will, unless revoked, be cast as indicated in those ballots. If no vote is indicated on a ballot that has been delivered with a properly executed proxy card, the CBOE membership(s) represented by the ballot and proxy card will be voted in accordance with the recommendation of the CBOE board of directors and, therefore, "FOR" the adoption of the Agreement and Plan of Merger to affect the restructuring transaction and "FOR" any proposal that may be made to adjourn or postpone the special meeting.

        If you return a ballot and properly executed proxy card and have indicated that you have abstained from voting on a proposal, your CBOE memberships represented by the ballot and proxy will be considered present at the CBOE special meeting for purposes of determining a quorum. We urge you to mark each applicable box on the ballot or voting instruction card to indicate how to vote your CBOE membership.

        You may change your ballot and revoke your proxy at any time before it is cast by:

        Attendance at the CBOE special meeting will not, in and of itself, constitute revocation of a previously delivered ballot or granted proxy. If the CBOE special meeting is adjourned or postponed, it will not affect the ability of CBOE members to exercise their voting rights or to change any previously delivered ballot or to revoke any previously granted proxy using the methods described above.

        Returning your completed ballot and proxy will not prevent you from changing your vote or revoking your proxy and voting in person at the special meeting of Members. Please note, however, that if you submit your ballot and proxy through one of the available methods, you will not need to attend the special meeting of Members or take any further action in connection with the special meeting because you already will have directed your proxy to deliver your ballot with respect to the proposal to be brought at the special meeting.

Confidential Voting

        It is the CBOE's policy that all ballots and voting tabulations that identify the CBOE members be kept confidential. The CBOE intends to engage a third-party firm to serve as inspector of election and

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count the ballots. The CBOE Election Committee will oversee the third-party firm selected to count the ballots.

Solicitation of Ballots and Proxies

        The CBOE board of directors is making the solicitation of ballots and proxies. The CBOE will pay the expenses incurred in connection with the printing and mailing of this document. To assist in the solicitation of ballots and proxies, the CBOE has retained            for a fee not to exceed $                  plus reimbursement of out-of-pocket expenses. Solicitation of ballots and proxies by mail may be supplemented by telephone and other electronic means, advertisements and personal solicitation by the directors, officers or employees of the CBOE. No additional compensation will be paid to our directors, officers or employees for solicitation.

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THE RESTRUCTURING TRANSACTION

        This section of the document describes material aspects of the proposed restructuring transaction. This summary may not contain all of the information that is important to you. You should carefully read this entire document, including the full text of the Agreement and Plan of Merger, which is attached as Annex G, and the other documents we refer you to for a more complete understanding of the restructuring transaction. In addition, we incorporate important business and financial data about us into this document by reference. You may obtain the information incorporated by reference into this document without charge by following the instructions described under "Where You Can Find More Information," which begins on page 171.

General

        The restructuring transaction will be completed through the following steps:

        As part of the restructuring transaction, each CBOE Seat existing as of the date of the restructuring transaction will be converted into the right to receive              shares of Class A CBOE Holdings common stock. In addition, Participating Group A Settlement Class Members will be issued, immediately following the Merger, Class B common stock of CBOE Holdings as required by the Settlement Agreement. As a result, the owners of the CBOE Seats outstanding immediately prior to the restructuring transaction will own 100% of the Class A common stock, and the Participating Group A Settlement Class Members will be issued 100% of the Class B common stock, which in the aggregate will equal approximately 21.9% of the number of shares of the Class A common stock issued to the CBOE Seat Owners in the restructuring transaction. As a result, the Class A common stock issued in the restructuring transaction and the Class B common stock issued pursuant to the Settlement Agreement will represent approximately 82% and 18%, respectively, of the combined total common stock issued to the Seat Owners in the restructuring transaction and the Participating Group A Settlement Class Members pursuant to the Settlement Agreement.

        The common stock of CBOE Holdings will represent an equity ownership interest in CBOE Holdings and will have traditional features of common stock, including equal per share dividend, voting and liquidation rights, except that Class B common stock issued in connection with the

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Settlement Agreement will have no voting rights or privileges except as described in "Description of CBOE Holdings Capital Stock—Common Stock" on page 146. The rights of holders of CBOE Holdings common stock will be different from the rights of the CBOE members because the CBOE Holdings certificate of incorporation and bylaws in effect immediately after the restructuring transaction will be different from the governing documents of the CBOE. See "Comparison of Rights Prior to and After the Restructuring Transaction" on page 160 for a description of material differences.

        The CBOE Holdings common stock issued in the restructuring transaction, however, will not provide its holders with physical or electronic access to the CBOE's trading facilities. Following the restructuring transaction, physical and electronic access to the CBOE trading facilities, subject to such limitations and requirements as will be specified in the rules of the CBOE, will be available to individuals and organizations that have obtained a trading permit from the CBOE. For more information regarding trading access following the restructuring transaction, please see "—Trading Permits" on page 44.

Background of the Restructuring Transaction

        Over the past several years, the CBOE has been faced with competition from both new and existing exchanges. Some of these competitors were established as for-profit exchanges, and others were converted from not-for-profit membership organizations to for-profit stock corporations. Along with changing their focus to that of a for-profit business, these demutualized exchanges typically have corporate and governance structures more like those of other for-profit businesses, which gives them greater flexibility in responding to the demands of the rapidly changing regulatory and business environment in which they conduct their activities. In addition, by being structured as stock, for-profit corporations, these other exchanges have opportunities to engage in business combinations and joint ventures with other organizations and to access capital markets in ways that are not available to non-stock membership corporations.

        In January 2005, responding to these changes, the CBOE's board of directors authorized the formation of a Business Model Task Force, charged with the responsibility to develop a strategic plan that would respond to the challenges faced by the CBOE. Specifically, the Task Force was directed to consider the advantages and disadvantages of changing the business model of the CBOE to that of a for-profit business and making related changes to the ownership, corporate structure, and governance of the CBOE, possibly extending to the complete restructuring of the CBOE whereby it would be converted into a stock, for-profit corporation. The Task Force was directed to report its conclusions and recommendations to the full board.

        The Business Model Task Force consisted of four independent directors and three member directors and was chaired by James Boris, an independent director. Although the Business Model Task Force often met in executive sessions at which only members of the Task Force were present, in conducting its review and analysis, the Task Force was assisted by the management of the CBOE and by Goldman, Sachs & Co., an investment banking firm hired by the Task Force for this purpose. The Task Force obtained legal support from Schiff Hardin LLP, legal counsel to the CBOE, Richards, Layton & Finger, special Delaware legal counsel to the CBOE, and Sullivan & Cromwell LLP, special counsel to the CBOE in matters pertaining to the restructuring transaction.

        The Business Model Task Force held 12 formal meetings, beginning on February 17, 2005, and continuing until September 1, 2005. From the outset, the Task Force realized that any restructuring plan that it might recommend would have to deal with the valuation of the Exercise Right held by full members of the CBOT, pursuant to the CBOE's certificate of incorporation. Nevertheless, the Task Force determined it should first consider what changes to the structure, ownership and governance of the CBOE it would recommend before giving consideration to the Exercise Right.

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        Accordingly, at its first few meetings the Task Force focused on how the CBOE should change its business model and how it should be organized and governed. Early in its deliberations, the Task Force concluded that formal changes to the corporate structure and ownership would take some time to put into effect, not only on account of the many steps required to accomplish this goal, but also because the implementation of these changes required that the Exercise Right be addressed. On the other hand, the Task Force also determined that several of the changes necessary to convert the CBOE to a for-profit business model could be put into effect prior to the time the CBOE would be in a position to implement a formal corporate restructuring. This determination was incorporated in the Task Force's preliminary recommendation made to the CBOE's board of directors at a meeting held on September 13 and 14, 2005. That recommendation included both near-term and long-term components.

        For the near term, the Task Force recommended that, effective January 1, 2006, the CBOE should adopt a "for-profit" business model to the extent compatible with its current corporate structure. Under such a business model, the CBOE would modify its governance and otherwise conduct its business activities with a focus on maximizing its profit potential in a manner consistent with the fulfillment of its responsibilities as a self-regulatory organization, even though it would not yet be structured as a for-profit stock corporation. For the longer term, the Task Force recommended that the CBOE should move forward with a program designed to provide for the restructuring of the CBOE by separating ownership of the Exchange from trading access and by changing the Exchange's corporate structure from that of a Delaware non-stock, corporation owned by its members to that of a Delaware stock, for-profit corporation that would be a subsidiary of a new Delaware stock, for-profit holding company owned by its stockholders.

        On September 14, 2005, at a regularly scheduled meeting, the CBOE's board of directors adopted these preliminary recommendations of the Task Force and directed the Exchange's management to proceed with the development of a detailed plan to implement both the near-term and long-term components of the recommendations. Specifically, management was directed to start transitioning to a for-profit business model commencing January 1, 2006, by addressing both the budgetary and governance implications of such a change. The board also directed the development of the necessary corporate documents and regulatory filings needed to implement the restructuring recommended by the Task Force. The board also encouraged management to engage in discussions with other organizations regarding transactions that might further the goals articulated by the Business Model Task Force and adopted by the board. The board requested that management present a business plan and budget at its January 26, 2006 meeting that reflected the transition to a for-profit business model, including adjustments to the CBOE's fee structure. Following the September 2005 board meeting, the CBOE engaged the Boston Consulting Group, or the BCG, to assist in a review of the CBOE's strategy. Over the next eleven weeks, the BCG worked with management on pricing strategy, overall strategy and change management.

        On October 27, 2005, at a regularly scheduled meeting of the board of directors of the CBOE, management reported to the board on the progress with respect to its plans to effect the conversion of the CBOE to a for-profit stock corporation and to start the transition to a for-profit operation beginning January 1, 2006.

        At the regularly scheduled board meeting of December 8, 2005, the BCG presented to the board the results of their eleven-week review of the CBOE relating to strategy, pricing and managing change. Following discussion, the board of directors reaffirmed the goal of unlocking value for its members through the conversion of the CBOE to a for-profit stock corporation with the transition to a for-profit model to start January 1, 2006. The board also approved several governance changes designed to streamline decision-making and enhance the efficiency of the advisory committees.

        On January 26, 2006, at a regularly scheduled meeting of the CBOE's board of directors, the board approved the business plan and budget proposed by management that addressed the strategic

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priorities established during the December 8, 2005 board meeting and began the transition to a for-profit business model. Management also proposed and the board adopted the creation of a Strategy and Implementation Task Force, or the SITF. The SITF consisted of five independent directors, the Vice Chairman, one floor director, the lessor director and a member firm director. Its role was to oversee the implementation of the CBOE's strategy with respect to its restructuring, including making recommendations to the board of directors regarding the details of the CBOE's demutualization. Management also established a demutualization team that would be responsible for developing an S-4 Registration Statement for such a restructuring.

        The SITF had six formal meetings between March and July 2006, as well as a number of less formal discussions among its members. At these meetings, the task force addressed various aspects of the CBOE's demutualization, including the form the demutualization would take; the steps required to implement the demutualization; the consideration to be received by CBOE members; tax and accounting treatment; restrictions to be placed on the stock received by CBOE members; the centralization of access rights within the CBOE how access would be granted after the demutualization; special petition rights for members prior to an initial public offering, if any; ownership and voting limitations; potential organized sales of CBOE Holdings stock; the form governance would take after demutualization; and the amendments required to the CBOE's Constitution and Rules. The Task Force was assisted in its deliberations by its financial advisors, Goldman Sachs, its legal counsel, Schiff Hardin, special legal counsel, Sullivan & Cromwell, and special Delaware counsel, Richards, Layton & Finger. The results of these deliberations are reflected in the transaction proposed in this document.

        Over this same period of time, management also held discussions with several financial exchanges regarding potential transactions with the CBOE. These discussions included the potential for investments by the CBOE, the potential acquisition of other organizations by the CBOE and the potential acquisition of the CBOE by other organizations. Management was assisted in these explorations by the financial and legal advisors mentioned above. In one case, these exploratory discussion lead to an extensive due diligence process. Ultimately, management did not recommend, and the board of directors did not pursue, any of these potential transactions.

        On March 23, 2006, at a regularly scheduled meeting of the board of directors of the CBOE, the board was briefed regarding the status of work on the restructuring transaction and was briefed by outside counsel regarding the registration process, the additional obligations that are applicable to registered companies, and various relevant provisions under the securities laws.

        On May 11, 2006, at a regularly scheduled meeting of the board of directors of the CBOE, management described and discussed with the Board the primary components of the then-contemplated restructuring transaction and post-demutualization structure, as well as the next steps in the process and key open issues.

        On July 27, 2006, at a regularly scheduled meeting of the CBOE board of directors, the SITF presented its recommendations regarding the demutualization of the CBOE. The board of directors approved the restructuring as recommended by the SITF, authorized the creation of CBOE Holdings and CBOE Merger Sub and authorized the preparation of an S-4 Registration Statement for purposes of implementing the demutualization of the CBOE. The board approved interim boards for CBOE Holdings and CBOE Merger Sub and authorized management to file an S-4 registration statement. The board also approved the creation of a Special Independent Directors Committee consisting of four independent directors (the "Special Committee"). The board delegated to the Special Committee the sole authority to determine the manner in which the membership interest held by Exercise Member Claimants and CBOE Seat owners would be converted into the right to receive the consideration to be received in any demutualization of the CBOE. The Board resolved not to approve or recommend any demutualization providing for a conversion of membership interests in the CBOE into other interests unless the consideration to be received in such transaction was consistent with the

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conversion of membership interests as determined by the Special Committee. The Special Committee was empowered to engage its own legal counsel and its own financial advisor to assist it in discharging these duties.

        Following the creation of the Special Committee at the July 27, 2006 board meeting through January 2007, the SITF met five times to consider open issues related to the restructuring transaction that had not been delegated to the Special Committee.

        On August 23, 2006, the CBOT, in concert with others, initiated a purported class action lawsuit in Delaware against the CBOE and its directors regarding the demutualization of the CBOE. The CBOT lawsuit alleged that the CBOE board had already decided that the Exercise Member Claimants would not be entitled to the same consideration as other CBOE members in connection with the restructuring of the CBOE and sought to have the Delaware Chancery Court issue a declaratory judgment and an injunction to require that any Exercise Member Claimant would be entitled to the same consideration as a CBOE Seat owner. The CBOE's position was that this suit was premature, as the Special Committee had not arrived at any conclusions regarding the consideration to be received by an Exercise Member Claimant.

        On September 28, 2006, at a regularly scheduled meeting of the CBOE board of directors, the board was briefed regarding the work on the restructuring transaction. At the request of the Special Committee, the Special Committee's charter was broadened to give the Special Committee the authority to determine whether any of the administrative or regulatory requirements the CBOE's Rules impose upon persons who apply to become Exercise Member Claimants should be modified or waived in the event of a CBOE demutualization.

        On October 17, 2006, the Chicago Mercantile Exchange Holdings, Inc., or CME Holdings, and CBOT Holdings Inc. announced that CME Holdings would acquire the CBOT. Because of the significant changes to the structure and ownership of the CBOT, and to the rights of CBOT members, that would result from the completion of this proposed transaction, its announcement required the CBOE board to consider the possible impact of the proposed acquisition transaction on the eligibility of CBOT members to become and remain members of the CBOE pursuant to the Exercise Right provided for in paragraph (b) of Article Fifth, or Article Fifth(b), of the CBOE's certificate of incorporation.

        On December 12, 2006, at a regularly scheduled meeting of the board of directors of the CBOE, lawyers from the CBOE's outside legal counsel, Schiff Hardin, presented a legal analysis of the impact of the CME/CBOT Transaction on the CBOE Exercise Right. Following a discussion from which members of the Special Committee were recused, the board determined that CBOT would no longer have "members" as contemplated by Article Fifth(b) upon the completion of the CME/CBOT Transaction and authorized CBOE management to submit a rule filing to the SEC consisting of (1) an interpretation of Article Fifth(b) in a manner consistent with this determination and (2) authorization for the CBOE, upon completion of the CME/CBOT Transaction, to grant temporary access to former Exercise Member Claimants who had exercised and were in good standing as members of the CBOE on December 11, 2006, to the extent and for the period of time necessary to avoid disruption to the CBOE's market as a result of the ineligibility of such persons to maintain the status of Exercise Member Claimants. The CBOE submitted this rule filing on December 12, 2006, and amended it on January 17, 2007. This rule filing is sometimes referred to as the "eligibility rule filing."

        Following the approval of this action, the directors on the Special Committee were invited to rejoin the meeting and were informed of the board's decision. The Special Committee informed the board that, based on the board's interpretation of the impact of the CME Holdings' acquisition on the Exercise Right and based on the board's understanding that the acquisition would likely close prior to the demutualization of the CBOE, the Special Committee would defer further deliberations until such

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time as it became appropriate to either reinitiate the Special Committee's deliberations, terminate the Special Committee's existence, or take such other action as was warranted.

        On January 4, 2007, the CBOT and the other plaintiffs in the Delaware action against the CBOE filed an amended complaint that challenged the interpretation of Article Fifth(b) that the CBOE had filed with the U.S. Securities and Exchange Commission on December 12, 2006. On January 11, 2007, plaintiffs submitted a motion for summary judgment on their claims. In addition to continuing to assert their claims about the amount of consideration to which Exercise Member Claimants would be entitled as part of the CBOE restructuring transaction, plaintiffs sought a declaratory judgment and an injunction to prevent the CBOE from implementing the interpretation of Article Fifth(b) that the CBOE had filed with the Commission. On January 16, 2007, CBOE and the director defendants moved to dismiss the amended complaint to the extent it challenged CBOE's interpretation, on the ground that the U.S. Securities and Exchange Commission's jurisdiction to consider such interpretations of Article Fifth(b) preempts any state law challenge to that interpretation. In this motion, defendants further moved to stay consideration of plaintiffs' claims regarding the consideration to which Exercise Member Claimants otherwise would be entitled until it was known whether the CME Holdings acquisition of CBOT would close before CBOE's restructuring.

        On January 25, 2007, at a regular scheduled meeting of the CBOE board of directors, management made a presentation describing the restructuring transaction and the board approved the proposed terms of the restructuring transaction and authorized the board of CBOE Holdings to file the registration statement of which this prospectus is a part with the SEC.

        On March 15, 2007 the Intercontinental Exchange (ICE) made an unsolicited bid to acquire the CBOT in competition with the CME/CBOT Transaction. ICE approached CBOE regarding a potential joint proposal which would be designed to resolve the Exercise Right issue as part of an ICE acquisition of the CBOT. On May 30, 2007, CBOE and ICE announced that they had entered into an exclusive agreement in which each full member of the CBOT holding an exercise right would be entitled to receive $500,000 in cash and/or debt securities convertible into the stock of a newly created CBOT/ICE Holdings in exchange for relinquishing the exercise right. The agreement was contingent upon the closing of the proposed merger of ICE and CBOT Holdings.

        In June 2007, the CBOT Holdings board recommended and the shareholders approved the CME merger proposal. The CME/CBOT Transaction closed on July 12, 2007.

        On June 29, 2007, to address issues raised by the CME/CBOT Transaction, the CBOE Board approved an interpretation of CBOE Rule 3.19, which provided that persons who were Exerciser Members in good standing before the consummation of the CME/CBOT Transaction would temporarily retain their CBOE membership status until the SEC ruled on the eligibility rule filing. We refer to this interpretation as the interim access interpretation. The CBOE filed the interim access interpretation with the SEC on July 2, 2007, and it went into effect upon its filing.

        On July 20, 2007, CBOT and the other plaintiffs filed a motion requesting that the Court enter a temporary restraining order prohibiting CBOE from implementing or enforcing the interim access interpretation. On August 3, 2007, the Court denied the motion for a temporary restraining order.

        On August 28, 2007, the CBOE board of directors approved a second interpretation of CBOE Rule 3.19, which provided that the membership status of those persons who temporarily retained their CBOE membership status pursuant to the interim access interpretation would continue after the SEC approved the eligibility rule filing until other specified events occurred. We refer to this interpretation as the continued membership interpretation. The continued membership interpretation was filed with the SEC on September 10, 2007 and was effective on filing.

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        On January 15, 2008, the SEC approved the CBOE rule filing that CBOT "no longer had 'members' as contemplated by Article Fifth(b) following the completion of the CME/CBOT Transaction."

        On February 6, 2008, the plaintiffs in the Delaware action filed their third amended complaint. Plaintiffs' essential claims remained the same, although plaintiffs alleged in their new complaint that the adoption of the interim access interpretation damaged so-called CBOT full members in their capacity as owners and lessors of such memberships and that CBOE's Board of Directors was dominated by interested directors when it approved the eligibility rule filing, the interim access interpretation and the continued membership interpretation.

        On March 14, 2008, CBOT and two CBOT members appealed to the United States Court of Appeals for the District of Columbia from the SEC order that approved the eligibility rule filing and CBOE was granted leave to intervene in that appeal.

        During the fall of 2007 and into Spring 2008, CBOE management and class representative engaged in periodic settlement discussions. On June 2, 2008, two days before the Delaware Court was to hear argument on motions for summary judgment, the parties entered into a written agreement in principle to settle both the Delaware litigation and the appeal of the SEC order pending in the federal Court of Appeals. On July 24, 2008, CBOE's Board of Directors approved the material terms of the Settlement Agreement as then presented to the Board and authorized the Office of the Chairman to finalize the agreement. On August 20, 2008, the parties entered into a definitive Stipulation of Settlement and that agreement was preliminarily approved by the Delaware Court on August 22, 2008. On August 22, 2008, CBOE held an informational membership meeting regarding the Settlement Agreement. On September 17, 2008, CBOE's membership approved the Settlement Agreement.

        On December 16, 2008, the Delaware Court conducted a lengthy hearing to consider whether to approve the settlement of the litigation and to consider the objections to the proposed settlement. At the conclusion of the hearing, the Court indicated that it would issue a comprehensive written opinion, but it did not indicate when that decision would be forthcoming.

        On May 6, 2009, CBOE Board of Directors approved certain changes to the restructuring transaction and certain changes to the proposed post-demutualization Certificate of Incorporation of CBOE Holdings.

        On June 3, 2009, the Delaware Court entered an order approving the Settlement Agreement, while reserving ruling on whether certain objectors were eligible to participate in that settlement. After subsequently ruling on those objections, the Delaware Court, on July 29, 2009, entered a final order approving the Settlement Agreement, resolving all open issues about the settlement and dismissing the Delaware litigation. The order is subject to any appeals that may be filed by August 28, 2009. No appeals had been filed as of the date this registration statement was filed.

The CBOE's Reasons for the Restructuring Transaction

        In approving the restructuring transaction, the CBOE board of directors considered a number of factors, including the ones discussed in the following paragraphs. In light of the number and wide variety of factors considered in connection with its evaluation of the transaction, the CBOE board of directors did not consider it practicable to, and did not attempt to, quantify or otherwise assign relative weights to the specific factors it considered in reaching its determination. The CBOE board viewed its position as being based on all of the information available and the factors presented to and considered by it. In addition, individual directors may have given different weight to different factors. This explanation of the CBOE's reasons for the proposed restructuring transaction and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed under "Forward-Looking Statements" on page 27.

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        In reaching its decision, the CBOE board of directors consulted with the CBOE management with respect to strategic, operational and regulatory matters, as well as with its outside legal counsel and financial advisors and the board's special counsel.

        The CBOE board of directors believes that changing the CBOE's focus to that of a for-profit business, along with modifying the CBOE's corporate and governance structures to be more like those of other for-profit businesses, will provide the CBOE with greater flexibility to respond to the demands of a rapidly changing business environment. By being structured as a stock, for-profit corporation, the CBOE will be able to pursue strategic opportunities to engage in business combinations and joint ventures with other organizations and to access capital markets in ways that are not available to non-stock, membership corporations. As a stock corporation, ownership will be separated from access. Stock will provide a "currency" separate from access that can be used in acquisitions and mergers. Furthermore, our stock will give us the ability to raise capital through stock issuances. We believe that the restructuring transaction will move us one step closer to achieving our key objectives of providing our owners a more liquid investment and creating a framework for a possible future public offering of CBOE Holdings common stock.

        The CBOE board of directors also believes that the restructuring of the CBOE will enable the CBOE to enhance its competitiveness with other options exchanges, including both open outcry and electronic markets, while preserving the CBOE's ability to provide trading opportunities and benefits to our members. The proposed changes in our structure will streamline the governance and decision-making process, which will allow us to respond more quickly to changes in the competitive environment. In addition, our for-profit structure will remove ambiguity with respect to objectives and priorities and establish shareholder interest as the primary guidepost for decision making. At the same time, our new structure will allow us to provide trading access through trading permits, which will be issued by the exchange. See "The Restructuring Transaction—Trading Permits" on page 44 for a discussion of this access. This shift in how access is granted will also alter how we think of the users of our marketplace. Users, as distinct from owners, will become customers of the CBOE. It will be clear that the interest of shareholders is served by providing trading opportunities and other benefits to these customers in a way that prompts them to continue to prefer the CBOE to alternative marketplaces. The board believes that the restructuring transaction will allow the CBOE to:

        As such, the restructuring transaction is designed to:

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        The board also considered the following potentially negative factors associated with the restructuring transaction:

Alternatives to the Restructuring Transaction

        In considering the restructuring transaction, the CBOE board of directors also considered a number of strategic alternatives available to the CBOE, including:

        The CBOE board of directors believed and continues to believe that these potential risks and drawbacks are outweighed by the potential benefits that the CBOE board expects the CBOE and its members to achieve as a result of the proposed restructuring transaction.

What You Will Receive in the Restructuring Transaction

        CBOE Holdings, Inc. Common Stock.    In the restructuring transaction, each CBOE Seat existing on the date of the restructuring transaction will be converted into the right to receive             shares of Class A common stock of CBOE Holdings. In addition, Participating Group A Settlement Class Members will be issued, immediately following the Merger and as required by the Settlement Agreement,             shares of Class B common stock of CBOE Holdings.

        If CBOE Holdings completes a public offering, each outstanding share of Class A common stock and Class B common stock automatically shall be converted into one-half of one share of Class A-1 common stock and one-half of one share of Class A-2 common stock, effective upon completion of such public offering. The Class A-1 and A-2 common stock shall have all the same rights and privileges as the Class A common stock; however, the Class A-1 and A-2 common stock will be issued subject to

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certain transfer restrictions that will continue following the closing of a public offering for different durations. For a description of these transfer restrictions, please see below. In addition, effective upon the expiration of the lock-up period associated with the shares of Class A-1 and Class A-2 common stock, such shares shall automatically convert into shares of unrestricted common stock of CBOE Holdings, and such shares shall be freely tradable.

        Transfer of CBOE Holdings Common Stock Following the Restructuring Transaction.    Following the restructuring transaction and unless and until a public offering by CBOE Holdings of its common stock has been completed, pursuant to the certificate of incorporation of CBOE Holdings, transfers of the Class A and Class B common stock of CBOE Holdings may only take place through the agent of CBOE Holdings that has been designated by CBOE Holdings to manage such transfers and through the broker or market designated by CBOE Holdings as the sole broker or market for such transfers. The broker designated by CBOE Holdings will maintain a record of the prices bid and offered by sellers and buyers and the time such bids and offers are submitted to the broker. When a bid and offer match, the broker will consummate the transaction and inform the parties. It is intended that this process will function much like the existing process for the sale and transfer of CBOE Seats.

        In addition, in the event the CBOE Holdings board of directors determines to proceed with a future public offering, the board may institute lock-up restrictions with respect to the Class A and Class B common stock by issuing a press release to the effect that such transfer restrictions will commence on a date no earlier than 10 calendar days following the date of such announcement. These transfer restrictions are sometimes referred to as the "Interim Transfer Restrictions." The Class A and Class B common stock shall remain subject to these Interim Transfer Restrictions until such shares are converted into shares of Class A-1 and A-2 common stock at the time of the closing of any such public offering. At that time, the shares of Class A-1 and A-2 common stock will be issued subject to similar transfer restrictions. During this lock-up period, shares of Class A common stock and Class B common stock of CBOE Holdings may not be directly or indirectly assigned, offered for sale, sold, transferred or otherwise disposed of, except pursuant to limited exceptions set forth in the CBOE Holdings certificate of incorporation, which provides for certain permitted transfers to affiliates, family members, qualified trusts and estates, as well as certain pledges and the potential transfer upon a bona fide foreclosure resulting therefrom.

        Transfer Restrictions on CBOE Holdings Common Stock Following a Public Offering.    In the event CBOE Holdings engages in a public offering of its common stock in the future, the shares of Class A and Class B common stock automatically shall convert, effective at the time of the closing of such public offering, into shares of Class A-1 and Class A-2 common stock and upon issuance will be subject to the transfer restrictions or "lock-up restrictions" under CBOE Holdings' certificate of incorporation. These lock-up restrictions will expire on the Class A-1 and Class A-2 common stock as of the 180th and 360th day, respectively, following the closing date of any such public offering. During any applicable lock-up period, shares of the affected series of CBOE Holdings Class A or Class B common stock may not be directly or indirectly assigned, offered for sale, sold, transferred or otherwise disposed of, except pursuant to limited exceptions set forth in the CBOE Holdings certificate of incorporation, which provides for certain permitted transfers to affiliates, family members, qualified trusts and estates, as well as certain pledges and the potential transfer upon a bona fide foreclosure resulting therefrom. Subject to possible extension in the event of an organized sale, as set more fully in this proxy statement and prospectus, upon the expiration of the applicable lock-up period with respect to the common stock, the shares of the common stock then scheduled to expire would automatically convert to unrestricted common stock that would be freely transferable.

        In addition to the restrictions described above, all shares of Class A, Class B, Class A-1 and Class A-2 common stock must be registered in the name of the owner and may not be registered in the name of any nominee or broker.

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Who Will Receive the Restructuring Consideration

        The CBOE Holdings Class A common stock issued in the restructuring transaction will be issued to the owner of a CBOE Seat. Therefore, if you are currently a member who owns a CBOE Seat, you will receive the CBOE Holdings Class A common stock issued in the restructuring transaction in exchange for your CBOE Seat. On the other hand, because we permit owners of CBOE Seats to lease their seats to other persons, it is possible that more than one person may have an interest in the same seat. For instance, during the term of a lease, the lessee is considered to be a member of the CBOE for trading purposes, although, under Delaware law, the owner of the CBOE Seat (or lessor) retains the equity right represented by the CBOE membership and is the member of the CBOE for purposes of ownership. The CBOE Holdings Class A common stock being issued in the restructuring transaction represents an equity interest in CBOE Holdings that is being issued in exchange for the former CBOE member's equity interest in the CBOE. The CBOE Holdings Class A common stock, therefore, will be issued to the owner of the CBOE Seat and not a lessee of a seat.

        As a result of the CME/CBOT Transaction and the approval by the SEC of the eligibility rule filing, and upon final approval of the Settlement Agreement (including any appeals of that approval), there no longer will be members of the CBOT who qualify to become or remain a member of the CBOE under Article Fifth(b) of CBOE's certificate of incorporation without having to purchase a separate CBOE membership. Accordingly, at the time of the restructuring transaction, there will be no exercise memberships outstanding to be converted in the restructuring transaction. The CBOE has agreed, pursuant to the Settlement Agreement, to make available a pool of Class B common stock to be paid to the Participating Group A Settlement Class Members. In addition, the CBOE has agreed to make available a pool of cash to be paid to the Participating Group A and Participating Group B Settlement Class Members. The Participating Group A Settlement Class Members and the Participating Group B Settlement Class Members will receive the settlement consideration described below pursuant to the terms of the Settlement Agreement and only after the Merger effecting the restructuring transaction is complete. The Participating Group A Settlement Class Members and Participating Group B Settlement Class Members will not receive any consideration in the restructuring transaction or in the Merger effecting the restructuring transaction. For a discussion of the Settlement Agreement, please see "—Exercise Right Settlement Agreement" on page 51.

Effect of the Restructuring Transaction on Trading Access

        In the restructuring transaction, all memberships in the CBOE and the trading rights they represent will be cancelled when the CBOE Seats are converted into the right to receive shares of Class A common stock of CBOE Holdings. The CBOE Holdings Class A common stock issued in the restructuring transaction will not provide the holder with any right to have physical or electronic access to the CBOE's trading facilities. Following the restructuring transaction, physical and electronic access to the trading facilities of the CBOE, subject to such limitations and requirements as will be specified in the Rules of the CBOE, will be available to individuals and organizations that have obtained a trading permit from the CBOE. For more information regarding trading access following the restructuring transaction, please see "—Trading Permits" below. In addition, effective upon completion of the restructuring transaction, each lease of a CBOE Seat will be voided, by operation of law or rule, and the lessee members will cease to have any trading rights under the lease after termination. Members who currently lease their seats, however, will have the opportunity to apply for a trading permit following the restructuring transaction. In addition, CBOE Temporary Members and holders of Interim Trading Permits immediately prior to the restructuring transaction will have the opportunity to apply for a trading permit on the same terms and conditions as are offered to owners of CBOE Seats. See "Trading Permits" below.

        In the restructuring transaction, all CBOE Seats existing on the date of the restructuring transaction will be converted into the right to receive CBOE Holdings Class A common stock, and the

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concept of a "member" of the CBOE under Delaware law (i.e., as a holder of equity) will cease to exist. The concept of "member" and "member organizations" of the CBOE for purposes of the Securities Exchange Act of 1934, or the Exchange Act, however, will continue to exist after the restructuring transaction (generally including individuals and organizations that have direct access to the CBOE as a result of obtaining a trading permit in the CBOE). Such individuals or organizations, however, will not, by virtue of being a "member" for purposes of the Exchange Act, be an equity owner of CBOE Holdings or any of its subsidiaries. Instead, such individuals and organizations will hold trading permits at the CBOE and, therefore, will be subject to the Rules and policies of the CBOE. Following the restructuring transaction, we will refer to these individuals and organizations as "Trading Permit Holders."

Trading Permits

        Trading Permits Following the Restructuring Transaction.    Prior to the date of the restructuring transaction, the CBOE will conduct an application process for post-restructuring trading permits in accordance with procedures to be established by the CBOE. The CBOE will notify the membership of these procedures prior to the commencement of the application process.

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        Eligible Holders.    Any individual or organization wishing to obtain a trading permit following the restructuring transaction will be subject to applicable regulatory requirements under the Rules. Permits will be issued to organizations and individuals approved by the CBOE to hold a trading permit ("qualified persons").

        Inactive Nominees.    The CBOE will continue the status of inactive nominees so as to allow firms to have nominees who can rotate on and off permits. All inactive nominees registered as such in the CBOE Membership System on the day prior to the restructuring transaction will have their inactive status continued automatically (assuming their affiliated firm receives a trading permit), unless the inactive nominee or their affiliated firm provides the CBOE with prior written notice of termination of the inactive nominee status effective on or prior to the restructuring transaction. Immediately following the restructuring transaction, inactive nominees will continue to be assessed fees to maintain their status, generally equivalent to those being assessed immediately prior to restructuring transaction. The CBOE may determine in the future to increase, decrease, waive or eliminate the fees assessed with respect to inactive nominees. Any such determination will be communicated to the Trading Permit Holders.

        Access to Related Exchanges.    The trading permits issued by the CBOE will also provide the Trading Permit Holder with trading access to OneChicago, LLC (OneChicago). However, trading access to CBOE Futures Exchange (CFE) and "C2", the proposed second option exchange to be wholly owned by CBOE Holdings, Inc., will be provided through separate trading permits issued by CFE and C2, respectively. The trading permits issued by CBOE will not provide access to CFE and C2.

        Ability to Transfer or Assign.    Trading permits will only be issued by the CBOE and cannot be leased or transferred to any person under any circumstances, except as follows: a firm may change the designation of the nominee in respect of each trading permit it holds in a form and manner prescribed

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by the CBOE. In addition, a Trading Permit Holder may, with the prior written consent of the CBOE, transfer a trading permit to a firm that is or is qualified to become a Trading Permit Holder (i) which is an affiliate or (ii) which continues substantially the same business of that Trading Permit Holder without regard to the form of the transaction used to achieve such continuation, for example, a merger, sale of substantially all assets, reincorporation, reorganization or the like.

        Additional Issuances.    From time to time, the CBOE in its discretion may determine to make available additional permits of one or more types. In connection with such an issuance, a qualified person and any affiliated qualified person are eligible to receive no more than the greater of (i) 10 of the trading permits in that specific issuance or (ii) 20% of total number of any specific issuance of trading permits. This limit, however, would not apply in the event the issuance number of the trading permits exceeds the demand for the trading permits. In the event the demand for trading permits exceeds the issuance number, trading permits will be made available through a random lottery process or on a first-come, first-served basis.

        Appointment Process.    Following the restructuring transaction, the CBOE intends to keep the existing appointment process (e.g., class quoting and appointment costs) specified in the rules. The CBOE also will have the authority to issue various types of trading permits that will allow Trading Permit Holders to: (i) act in one or more of the trading functions permitted under the CBOE's Rules (e.g., floor broker, market maker, etc.); and (ii) subject to the appointment process (e.g., class quoting limits and appointment costs) in the Rules, to trade one or more of the securities permitted to be traded on the CBOE. Under this provision, for example, the CBOE would have the authority to issue trading permits that will allow applicants to act as specific types of liquidity providers in particular options classes.

        Tier Appointments.    In the future, the CBOE may also create a new type of appointment called a "tier appointment." A "tier appointment" is an appointment to trade one or more options classes that must be held by a market maker to be eligible to trade the options class or options classes subject to that appointment. The application and issuance processes for tier appointments will be in accordance with, and subject to the same terms and conditions as, the application and issuance processes for trading permits as described above. A tier appointment will be for the same term as the trading permit with which the tier appointment is associated. Termination, change, renewal, and transfer of tier appointments, and the authority of the CBOE to limit, reduce, or increase tier appointments, will also be in accordance with, and subject to the same terms and conditions as, the processes for trading permits as described above. Tier appointments will be in addition to the current appointment cost process under the rules, which will remain unchanged in connection with the restructuring transaction. As with trading permits, the CBOE will from time to time determine and announce to the members the price of each tier appointment, and the prices may vary by tier appointment.

        Other Rules.    The other CBOE Rules applicable to trading permits will be substantially similar to those in place today with respect to memberships.

        Trading Access Rules Subject to SEC Approval.    Before the Rules go into effect, they must be approved by the SEC. Accordingly, the Access Rules as finally adopted may differ from those described above. The CBOE's program for providing trading access following the restructuring transaction will be in accordance with the CBOE's Rules as in effect at that time. Before any changes to the Rules go into effect, they must first be published for comment and then approved by the SEC.

Organized Sales

        If CBOE Holdings completes a public offering, CBOE Holdings will have the right to conduct organized sales of the Class A-1 and A-2 common stock of CBOE Holdings issued in the restructuring transaction when the transfer restriction period applicable to the shares of Class A-1 and A-2 common

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stock of CBOE Holdings is scheduled to expire. This right will also apply to the Class B common stock because, following any public offering, the Class B common stock will have been automatically converted to Class A-1 and A-2 common stock pursuant to CBOE Holdings' certificate of incorporation. The purpose of this right is to enable CBOE Holdings to facilitate a more orderly distribution of its common stock into the public market. If CBOE Holdings elects to conduct an organized sale, no shares of the Class A-1 or A-2 common stock of CBOE Holdings for which transfer restrictions are scheduled to lapse or of any other series that is subject to transfer restrictions may be sold during the applicable transfer restriction period, except as part of the organized sale or in a permitted transfer. Holders of the Class A-1 or A-2 common stock may elect to participate in such organized sale but are not required to do so.

        For a discussion of organized sales and the procedures to be followed in the event CBOE Holdings determines to conduct an organized sale, please see "Description of CBOE Holdings Capital Stock—Organized Sales" on page 153.

Amendments to the CBOE Certificate of Incorporation, Constitution and Bylaws

        As part of the restructuring transaction, the bylaws and certificate of incorporation for the CBOE will be amended and restated to reflect the new holding company structure, certain technical amendments required as a result of converting from a membership organization to a stock corporation and to change the capital structure and governing structure contained in such documents. The amended and restated bylaws of the CBOE will replace the CBOE's current Constitution, and following the restructuring transaction, the CBOE's amended and restated bylaws will no longer include the CBOE Rules. Please review carefully all the terms and conditions of the amended and restated bylaws and certificate of incorporation of not only the CBOE, but also CBOE Holdings. We have included the form of amended and restated certificate of incorporation for CBOE Holdings and form of amended and restated bylaws for CBOE Holdings in this proxy statement and prospectus as Annex C and D, respectively. The form of certificate of incorporation of the CBOE and form of amended and restated bylaws of the CBOE are also included in this proxy statement and prospectus as Annex E and F, respectively.

        Some of the more significant provisions of the CBOE and CBOE Holdings certificates of incorporation and bylaws are summarized below. For additional information on capital stock and corporate governance of the CBOE and CBOE Holdings see "Comparison Of Rights Prior to and After the Restructuring Transaction" on page 160.

        Capital Stock.    Pursuant to its certificate of incorporation, CBOE Holdings is authorized to issue (i)              shares of unrestricted common stock, par value $0.01 per share, (ii)              shares of Class A common stock, par value $0.01 as per share, (iii)              shares of Class A-1 common stock, $0.01 par value per share, (iv)               shares of Class A-2 common stock, $0.01 par value per share, (v)              shares of Class B common stock, $0.01 par value per share, and (vi) 20,000,000 shares of preferred stock. After the restructuring transaction, the CBOE will be authorized to issue 1,000 shares of common stock, par value $0.01 per share. All CBOE shares will be held by CBOE Holdings.

        Voting Rights.    After the restructuring transaction, you will hold ownership interests in CBOE Holdings and not the CBOE. These new ownership interests will entitle you to vote on matters pertaining to CBOE Holdings unless you hold only Class B common stock, which stock does not have voting rights. You will no longer vote on matters at the CBOE. CBOE Holdings, as the sole stockholder of the CBOE, will have the right to vote generally with respect to CBOE matters, including for the election of directors and on other matters as required by the bylaws, certificate of incorporation and the law of the State of Delaware. As a voting stockholder of CBOE Holdings, you will be entitled to vote, along with all other holders of CBOE Holdings voting common stock generally, with respect to CBOE Holdings matters, including for the election of directors and on other matters required by the

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bylaws, certificate of incorporation or the laws of the State of Delaware, except with respect to holders of Class B common stock, who have no voting rights or privileges except under limited circumstances more fully discussed in "Description of CBOE Holdings Capital Stock" on page 146.

        Voting Limitations.    No person, together with its related persons, may vote or cause to vote more than 10% of the voting power of CBOE Holdings without the prior approval of the board of directors of CBOE Holdings and, in certain circumstances, the SEC. If CBOE Holdings completes a public offering of its common stock, the voting percentage that any person would be permitted to control, whether through beneficially ownership or other agreement, would increase from 10% to 20% of the total number of votes entitled to be cast on any matter. This limitation is described in more detail below at "Description Of CBOE Holdings Capital Stock" on page 146.

        Ownership Limitations.    No person, together with its related persons, may directly or indirectly beneficially own more than 10% of the outstanding shares of common stock of CBOE Holdings without the prior approval of the board of directors of CBOE Holdings and, in certain circumstances, the SEC. If CBOE Holdings completes a public offering of its common stock, the ownership percentage that a person would be permitted to beneficially own would increase from 10% to 20% of the total outstanding shares of CBOE Holdings common stock. For additional information about this limitation and additional information about the capital stock of CBOE Holdings see "Description of CBOE Holdings Capital Stock" on page 146.

        Board of Directors.    There will be a separate board of directors for each of the CBOE and CBOE Holdings. It is anticipated that the same individuals will be on each board immediately following the restructuring transaction. After the restructuring transaction, the CBOE board will continue to consist of the same 23 directors who are serving on the board immediately prior to the restructuring transaction. The CBOE Holdings board will have the same 23 directors. At all times, the CBOE Holdings board will consist of the CBOE Holdings' chief executive officer and 22 other directors, no less than two-thirds of whom will at all times meet the independence requirements of CBOE Holdings and those established by either the New York Stock Exchange or the NASDAQ Stock Market. The CBOE board will consist of the CBOE's chief executive officer, as well as non-industry directors making up at least a majority of the board and industry directors making up at least 30% of the board, as each of those director classifications is defined in the applicable bylaws and certificate of incorporation. Failure of a director to maintain the categorical requirements of either a non-industry or an industry director may result in the director's removal from the board. Directors of each of the CBOE and CBOE Holdings will be elected by a plurality of votes. The CBOE board will no longer be a classified board with staggered terms of office. Rather, each director will serve for one year or until his or her successor is elected and qualified. Directors of CBOE Holdings will also serve for one year or until a successor is elected and qualified. There is no limit on the number of terms a director may serve on either board.

        Nomination of Directors.    After the restructuring transaction, the Nominating and Governance Committee of the CBOE will be comprised solely of board members and will nominate all directors for election at the CBOE. It is currently anticipated that the members of the Nominating and Governance Committee of the CBOE will be the same as the members of the Nominating and Governance Committee of CBOE Holdings. At the CBOE, however, the Nominating and Governance Committee will have an Industry-Director Subcommittee, which will consist of all of the industry directors serving on the Nominating and Governance Committee. The Industry-Director Subcommittee shall select industry directors that equal at least 20% of the directors serving on the board of the CBOE. For a discussion of the nomination procedures at each of CBOE Holdings and the CBOE, please see "Directors and Management of the CBOE And CBOE Holdings After the Restructuring Transaction—Committees of the CBOE Holdings Board of Directors—Nominating and Governance Committee" on page 123.

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        Exercise Right.    As part of the restructuring transaction, the certificate of incorporation of the CBOE will be revised to remove Article Fifth(b) as it would no longer be applicable to a demutualized CBOE. In any event, as a result of the CME/CBOT Transaction and the approval by the SEC of the eligibility rule filing, and upon final approval of the Settlement Agreement (including any appeals of that agreement), there no longer will be members of the CBOT who qualify to become a member of the CBOE under Article Fifth(b) without having to purchase a separate CBOE membership. As a result and in connection with the other amendments being made to the CBOE's certificate of incorporation, Article Fifth(b) of the CBOE's certificate of incorporation will be deleted as part of the restructuring transaction. Following the restructuring transaction, there will no longer be any reference in the CBOE certificate of incorporation to the Exercise Right described in the former certificate of incorporation of the CBOE.

Amendments to the CBOE Rules

        In addition to the changes to the CBOE's Constitution, certificate of incorporation and bylaws, as part of the restructuring transaction, the CBOE's Rules will be amended:

        The amendments to the Rules were previously submitted to the members of the CBOE in an Exchange Bulletin issued by the CBOE on August 29, 2008. In addition, to effect the majority of the amendments to the Rules described above and through this proxy statement and prospectus (as well as other immaterial amendments), the CBOE filed these proposed rule changes with the SEC on August 21, 2008 (Rule Filing No. SR-CBOE-2008-88). A copy of the rule filing is available on the CBOE's website at www.cboe.org/legal/submittedSECfilings.aspx. The notice of the proposed rules was published in the Federal Register on August 26, 2008. A copy of the published notice can be obtained at the SEC's website at www.sec.gov/rules/sro/cboe/2008/34-58425.pdf. In addition, with respect to the remainder of the amendments (mostly non-substantive conforming changes), the CBOE intends to file a companion rule filing with the SEC. We will make a complete copy of that rule filing available to you as soon as it is finalized.

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        These changes to our Rules will take effect at the time of the amendment to the certificate of incorporation of the CBOE as a result of the Merger. The form of the amended Rules of the CBOE that we currently expect to be implemented (subject to other changes to the Rules occurring after the date of this document), have been filed as an exhibit to the registration statement on Form S-4 of which this proxy statement and prospectus is a part.

        We urge you to review carefully the amended Rules and the published notice with respect to such Rules before voting on the proposed restructuring transaction.

Exercise Right Settlement Agreement

        On August 23, 2006, the CBOE and its directors were sued in the Court of Chancery of the State of Delaware, by the CBOT, CBOT Holdings Inc., the parent corporation of the CBOT, and two members of the CBOT who purported to represent a class of individuals who claim that they were, or had the right to become, members of the CBOE pursuant to the Exercise Right. The plaintiffs sought a judicial declaration that Exercise Member Claimants were entitled to receive the same consideration in any proposed restructuring transaction involving the CBOE as all other CBOE members, and the plaintiffs also sought an injunction to bar the CBOE and the CBOE's directors from issuing any stock to CBOE members as part of a proposed restructuring transaction, unless the Exercise Member Claimants received the same stock and other consideration as other CBOE members. For more information regarding this litigation, please see "Business—Legal Proceedings—Litigation with Respect to the Restructuring Transaction" on page 106.

        After two years of litigating issues in Delaware, the CBOE entered into a Stipulation of Settlement with the plaintiffs on August 20, 2008, pursuant to which the plaintiffs agreed to dismiss the pending action in Delaware, with prejudice, in exchange for the settlement consideration. The following summary addresses the material terms of the Settlement Agreement, but does not describe every term of the Settlement Agreement. You are encouraged to read the entire document, a copy of which is filed as Exhibit 4.4 to the registration statement on Form S-4 of which this proxy statement and prospectus is a part.

        The Participating Group A Settlement Class Members will receive the equity portion of the settlement consideration described below only after the Merger effecting the restructuring transaction is completed. The Participating Group A Settlement Class Members and the Participating Group B Settlement Class Members will not receive any consideration in the restructuring transaction or in the Merger effecting the restructuring transaction. As such, the disclosures contained in this proxy statement and prospectus, including those related to the restructuring transaction and the federal income tax consequences of the restructuring transaction, are not intended for, and should not be relied upon by, the Participating Group A Settlement Class Members and the Participating Group B Settlement Class Members.

        Settlement Class Members.    The Settlement Agreement calls for a non-opt out settlement class, which means that anyone in the settlement class is bound by the Settlement Agreement and does not have the right to pursue separate claims against the CBOE. The settlement class consists of two groups:

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        Financial Terms of Settlement Agreement.    Settlement class members will share the following settlement consideration:

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        Pursuant to the Settlement Agreement, the plaintiffs agree that upon final approval of the Settlement Agreement:

Shares of CBOE Holdings reserved for issuance to CBOE and CBOE Holdings Directors and Management

        The board of directors of the CBOE has adopted a long-term incentive plan pursuant to which the directors of the CBOE and CBOE Holdings, as well as management and other employees of the CBOE and CBOE Holdings, may be granted equity compensation as determined by the board of directors of CBOE Holdings from time to time.                          shares of unrestricted common stock have been reserved for issuance under the plan. It is currently anticipated that approximately                         shares of unrestricted common stock will be issued to the directors of CBOE and employees of CBOE effective immediately following the effectiveness of the restructuring transaction. The shares will be issued as restricted stock grants, as defined in the 2009 Long-Term Investment Plan.

Certain Relationships and Related-Party Transactions

        Currently, 11 of the 23 CBOE directors are individuals who are members of the CBOE or are officers, directors or employees of or are affiliated with organizations that are members of the CBOE. As a result, following the restructuring transaction, approximately 11 directors will be individuals who either will hold trading permits in the CBOE or will be officers, directors, employees or affiliates of organizations that will hold trading permits in the CBOE. These individuals and organizations that are currently members of the CBOE (and who will become holders of trading permits in the CBOE) derive a substantial portion of their income from their trading or clearing activities on or through the CBOE. The amount of income that a current member and a future holder of a trading permit may derive from its trading or clearing activities at the CBOE is, in part, dependent on the fees these individuals or organizations are charged to trade, clear and access our markets and the rules and structure of our markets. Current members and future holders of trading permits, many of whom do or will act as brokers and traders, benefit from trading rules, privileges and discounts that enhance their trading opportunities and profits. Current members pay fees (and future holders of CBOE trading permits will pay fees), either directly or indirectly, to the CBOE in connection with the services we provide, which in many cases could be substantial to the member (or future permit holder). The payments made by our directors that are currently members of the CBOE or affiliated with members of the CBOE (and who will become holders of trading permits or affiliated with holders of trading permits following the restructuring transaction) are on terms no more favorable than terms given to unaffiliated persons.

        Over the past three years, three different CBOE directors, Edward T. Tilly, John E. Smollen and Bradley G. Griffith, served as the Vice Chairman of the CBOE and received compensation from the CBOE for such service. In July 2009, Mr. Griffith took a leave of absence as Vice Chairman. For a description of the compensation paid to these individuals as Vice Chairman and a description of the payments to be made to Mr. Griffith in connection with his leave of absence, please see "Directors and Management of the CBOE and CBOE Holdings After the Restructuring Transaction—Compensation of Directors and Executive Officers" on page 134.

54


        The CBOE entered into a one-year consulting arrangement, commencing on January 1, 2007, with Mark F. Duffy, one of its directors, under which Mr. Duffy advises the CBOE on various matters related to the restructuring and other business initiatives. Mr. Duffy is paid for services actually provided at an hourly rate, subject to a minimum for the year of $200,000. This arrangement was renewed for 2008 and continues on a month-to-month basis.

Regulatory Approvals

        SEC Approvals.    The CBOE is registered as a national securities exchange pursuant to Section 6 of the Exchange Act. As a registered national securities exchange, the CBOE must comply with certain obligations under the Exchange Act. Under Section 19 of the Exchange Act and the related rules of the SEC, many changes in the rules of an SRO, such as the CBOE, must be submitted to the SEC for approval, including proposed amendments to the certificate of incorporation, bylaws, Rules or Constitution of the CBOE. No proposed rule change can take effect unless approved by the SEC or otherwise permitted by Section 19. As such, the proposed amendments to the CBOE's certificate of incorporation, Constitution and Rules that are a necessary part of the restructuring transaction will need to be approved by the SEC prior to the restructuring transaction and these amendments taking effect.

        Under Section 19 of the Exchange Act, the text of the proposed rule changes, together with a concise general statement of the statutory basis and the purpose of the change, must be submitted to the SEC, which then gives interested parties the opportunity to comment by publishing the proposal in the Federal Register. Critical comment letters typically are forwarded to the SRO for response. Unless the CBOE agrees to extend the applicable period within a period of 35 days of the publication of the proposed rule change (or a longer period of up to 90 days of the publication, if the SEC considers it appropriate), the SEC must either approve the proposal or institute proceedings to determine whether the proposed rule change should be disapproved. The CBOE consented to an extension of the applicable time period; therefore, the statutory time period will not begin to run until the CBOE files an amendment to the filing to inform the SEC that the CBOE membership has approved the restructuring transaction, at which time the CBOE can withdraw its consent to the extension. The date of publication also may be delayed for reasons outside the control of the CBOE; therefore, the time periods provided above will not begin to run until the proposal is published. The SEC will approve a proposed rule change if it finds that the change is consistent with the requirements of the Exchange Act and the rules and regulations of the Exchange Act. SROs may consent to extensions of any of these periods and, as a practical matter, will generally do so while addressing any concerns raised by the SEC staff.

        Pursuant to Rule 19b-4 under the Exchange Act, the SEC's approval of the changes to the certificate of incorporation, Constitution and Rules, including the bylaws, of the CBOE, as well as the forms of certificate of incorporation and bylaws of CBOE Holdings, is a condition to the completion of the restructuring transaction.

        Approvals under State Securities and "Blue Sky" Laws.    Approvals or authorizations may be required under applicable state securities, or "blue sky," laws in connection with the issuance of CBOE Holdings common stock in the restructuring transaction. Any approval of any governmental entity required for the consummation of the restructuring transaction is a condition to the completion of the restructuring transaction, unless the failure to obtain this approval would not reasonably be expected to result in a material adverse effect on the CBOE and its subsidiaries.

        General.    While we believe that we will receive the requisite regulatory approvals for the changes to our certificate of incorporation, Constitution and Rules, including the bylaws, that will be part of the restructuring transaction, there can be no assurances regarding the timing of the approvals, our ability to obtain the approvals on satisfactory terms or the absence of litigation challenging these approvals.

55



There can likewise be no assurance that U.S. federal, state or foreign regulatory authorities will not attempt to challenge the restructuring transaction, or, if a challenge is made, as to the results of the challenge.

Restrictions on Sales of Shares by Affiliates of the CBOE

        The shares of CBOE Holdings Class A common stock to be issued in connection with the restructuring transaction will be registered under the Securities Act of 1933, as amended (the Securities Act), and the shares of CBOE Holdings Class B common stock issued pursuant to the Settlement Agreement will be exempt from registration under the Securities Act by reason of Section 3(a)(10) thereunder. Accordingly, all such shares will be freely transferable under the Securities Act, except for any shares of CBOE Holdings common stock issued to any person who is deemed to be an "affiliate" of the CBOE at the time of the special meeting. While the CBOE Holdings Class A common stock issued in the restructuring transaction and the CBOE Holdings Class B common stock issued pursuant to the Settlement Agreement may be freely transferable under the Securities Act, the Class A and Class B common stock will be subject to transfer restrictions under the CBOE Holdings' certificate of incorporation. Following the transfer restriction period established in the certificate of incorporation, stock issued in the restructuring transaction and as part of the settlement will be freely transferable. For a description of these restrictions, see "—Amendments to the CBOE Certificate of Incorporation, Constitution and Bylaws" above. Persons who may be deemed to be affiliates include individuals or entities that control, are controlled by or are under common control with the CBOE and may include our executive officers and directors, as well as our significant stockholders. In addition to the other restrictions imposed on shares of CBOE Holdings stock, affiliates may not sell their shares of CBOE Holdings common stock acquired in connection with the restructuring transaction or acquired in the settlement except pursuant to:

        The CBOE expects that each of its affiliates will agree with CBOE Holdings that the affiliate will not transfer any shares of stock received in the restructuring transaction or acquired in the settlement, except in compliance with the Securities Act. Resales of CBOE Holdings common stock by affiliates of the CBOE and CBOE Holdings are not being registered pursuant to the registration statement of which this document forms a part.

Stock Exchange Listing

        We do not currently intend to list the common stock of CBOE Holdings on any stock exchange immediately following the completion of the restructuring transaction. If CBOE Holdings engages in a public offering, the common stock of CBOE Holdings likely would be listed at that time. There can be no assurances, however, that a public offering of CBOE Holdings will occur or that the common stock of CBOE Holdings will ultimately be listed on any stock exchange.

Appraisal Rights of Dissenting Members

        Holders of CBOE Seats who do not vote in favor of the restructuring transaction are entitled to appraisal rights under Section 262 of the Delaware General Corporation Law, or Section 262, in connection with the restructuring transaction, provided that they comply with the conditions established by Section 262. Under Section 262, where the restructuring transaction is to be submitted for adoption at a meeting of the members, the corporation, not less than 20 days prior to the meeting, must notify each of its members entitled to appraisal rights that appraisal rights are available and include in the

56



notice a copy of Section 262. This proxy statement shall constitute the notice and the full text of Section 262 is reprinted in its entirety as Annex H hereto. The following discussion does not purport to be a complete statement of the law relating to appraisal rights and is qualified in its entirety by reference to Annex H. The following summary does not constitute any legal or other advice nor does it constitute a recommendation that members exercise their appraisal rights under Section 262.

        THIS DISCUSSION AND ANNEX H SHOULD BE REVIEWED CAREFULLY BY ANY MEMBER WHO WISHES TO EXERCISE STATUTORY APPRAISAL RIGHTS OR WHO WISHES TO PRESERVE THE RIGHT TO DO SO, AS FAILURE TO COMPLY WITH THE PROCEDURES SET FORTH HEREIN OR THEREIN MAY RESULT IN THE LOSS OF APPRAISAL RIGHTS.

        Members of record who desire to exercise their appraisal rights must: (i) own a CBOE Seat on the date of making a demand for appraisal; (ii) continuously own such CBOE Seat through the effective time of the restructuring transaction; (iii) deliver a written demand for appraisal to the CBOE prior to the taking of the vote on the restructuring transaction at the special meeting of members; (iv) file any necessary petition in the Delaware Court of Chancery, as more fully described below, within 120 days after the effective time of the restructuring transaction; (v) not vote in favor of adoption of the restructuring transaction; and (vi) otherwise satisfy all of the conditions described more fully below and in Annex H.

        A CBOE member who makes the demand described below with respect to a CBOE Seat, who continuously is a member through the effective time of the restructuring transaction, who otherwise complies with the statutory requirements of Section 262 and who neither votes in favor of the restructuring transaction nor consents thereto in writing will be entitled, if the restructuring transaction is consummated, to have his or her seat appraised by the Delaware Court of Chancery and to receive payment in cash of the "fair value" of the seat, exclusive of any element of value arising from the accomplishment or expectation of the restructuring transaction, together with interest, if any, as determined by the court. Neither voting against the adoption of the restructuring transaction, nor abstaining from voting or failing to vote on the proposal to adopt the restructuring transaction, will in and of itself constitute a written demand for appraisal satisfying the requirements of Section 262. Pursuant to paragraph (a) of Section 262, all references to "stockholder" and "shares" in Section 262, to the extent applicable, apply to members and the membership interests owned by such members, respectively. All references in this summary of appraisal rights to a "member" or "holders of CBOE memberships" are to the record owner or owners of CBOE memberships.

        ANY OWNER OF A CBOE SEAT WHO DESIRES TO EXERCISE HIS, HER OR ITS RIGHT TO DISSENT FROM THE RESTRUCTURING TRANSACTION MUST DELIVER TO THE CBOE A WRITTEN DEMAND FOR APPRAISAL OF HIS OR HER MEMBERSHIP PRIOR TO THE TAKING OF THE VOTE ON THE RESTRUCTURING TRANSACTION AT THE SPECIAL MEETING OF MEMBERS. SUCH WRITTEN DEMAND MUST REASONABLY INFORM THE CBOE OF THE IDENTITY OF THE MEMBER OF RECORD AND OF SUCH MEMBER'S INTENTION TO DEMAND APPRAISAL OF ANY CBOE SEAT OWNED BY SUCH MEMBER.

        A demand for appraisal must be executed by or on behalf of the CBOE member of record.

        A MEMBER WHO ELECTS TO EXERCISE APPRAISAL RIGHTS SHOULD MAIL OR DELIVER HIS, HER OR ITS WRITTEN DEMAND TO: CHICAGO BOARD OPTIONS EXCHANGE, INCORPORATED, 400 SOUTH LASALLE, CHICAGO, ILLINOIS 60605, ATTENTION: OFFICE OF THE SECRETARY.

        Prior to or within ten days after the effective time of the restructuring transaction, the surviving corporation must provide notice of the effective time of the restructuring transaction to all members who have complied with Section 262. Within 120 days after the effective time of the restructuring

57



transaction, either the surviving corporation or any member who has complied with the required conditions of Section 262 may file a petition in the Delaware Court of Chancery, with a copy served on the surviving corporation in the case of a petition filed by a member, demanding a determination of the fair value of the seats of all dissenting members. The surviving corporation does not currently intend to file an appraisal petition, and members seeking to exercise appraisal rights should not assume that the surviving corporation will file such a petition or that the surviving corporation will initiate any negotiations with respect to the fair value of such seat. Accordingly, members who desire to have their seats appraised should initiate any petitions necessary for the perfection of their appraisal rights within the time periods and in the manner prescribed in Section 262. Within 120 days after the effective time of the restructuring transaction, any member who has theretofore complied with the applicable provisions of Section 262 will be entitled, upon written request, to receive from the surviving corporation a statement setting forth the aggregate number of seats not voted in favor of the restructuring transaction and with respect to which demands for appraisal were received by the CBOE and the number of holders of such seats. Such statement must be mailed within ten days after the written request thereof has been received by the surviving corporation or within ten days after expiration of the time for delivery of demands for appraisal under Section 262, whichever is later.

        If a petition for an appraisal is timely filed, by a holder of a CBOE Seat and a copy thereof served upon the surviving corporation, the surviving corporation will then be obligated within twenty (20) days to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all members who have demanded payment for their seat and with whom agreements as to the value of their seat have not been reached. After notice to the members as required by the court, the Delaware Court of Chancery is empowered to conduct a hearing on the petition to determine those members who have complied with Section 262 and who have become entitled to appraisal rights thereunder.

        After determining the holders of CBOE Seats entitled to appraisal, the Delaware Court of Chancery will appraise the CBOE Seats owned by such members, determining the fair value of such seats exclusive of any element of value arising from the accomplishment or expectation of the restructuring transaction, together with interest, if any, to be paid upon the amount to be the fair value. Unless the court in its discretion determines otherwise for good cause shown, interest from the effective date of the restructuring transaction through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective date of the restructuring transaction and the date of payment of the judgment. In determining fair value, the Delaware Court is to take into account all relevant factors. The Delaware Supreme Court has stated that "proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court" should be considered in an appraisal proceeding, and that, "fair price obviously requires consideration of all relevant factors involving the value of a company."

        The Delaware Supreme Court stated that, in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts that could be ascertained as of the date of the transaction that throw any light on future prospects of the surviving corporation. Section 262 provides that fair value is to be "exclusive of any element of value arising from the accomplishment or expectation of the merger." In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a "narrow exclusion [that] does not encompass known elements of value," but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger v. UOP, Inc., the Delaware Supreme Court also stated that "elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered."

58


        Members considering seeking appraisal should recognize that the fair value of their seats as determined under Section 262 could be more than, the same as or less than the consideration to be received in the restructuring transaction if they did not seek appraisal of their seats. The cost of the appraisal proceeding (which do not include attorneys fees or fees and expenses of experts) may be determined by the Delaware Court and taxed against the parties as the Delaware Court deems equitable in the circumstances. Upon application of dissenting members of the CBOE, the Delaware Court may order that all or a portion of the expenses incurred by any dissenting members in connection with the appraisal proceeding, including, without limitation, reasonable attorneys' fees and the fees and expenses of experts, be charged pro rata against the value of all seats entitled to appraisal.

        If any member who demands appraisal of his or her CBOE Seat fails to perfect, or successfully withdraws or loses such holder's right to appraisal, the holder's seat will be deemed to have been converted at the effective time of the restructuring transaction into the restructuring transaction consideration applicable to other seats. A member will fail to perfect, or effectively lose or withdraw, the member's right to appraisal if no petition for appraisal is filed within 120 days after the effective time of the restructuring transaction or if the member delivers to the surviving corporation a written withdrawal of the member's demand for appraisal and an acceptance of the consideration in accordance with Section 262. Any holder of CBOE Seats who has duly demanded appraisal in compliance with Section 262 will not, after the effective time, be entitled to vote for any purpose any seats subject to such demand or to receive payment of dividends or other distributions on such seats, except for dividends or distributions payable to members of record at a date prior to the effective time.

        Any member may withdraw a demand for appraisal and accept the restructuring transaction consideration by delivering to the surviving corporation a written withdrawal of the demand for appraisal, except that (1) any attempt to withdraw made more than 60 days after the effective time of the restructuring transaction will require written approval of the surviving corporation, and (2) no appraisal proceeding in the Delaware Court will be dismissed as to any member without the approval of the Delaware Court, and the approval may be conditioned upon terms the Delaware Court deems just. If the member fails to perfect, successfully withdraws or loses the appraisal right, the member's seat will be converted into solely the right to receive the restructuring transaction consideration.

        FAILURE TO TAKE ANY REQUIRED STEP IN CONNECTION WITH THE EXERCISE OF APPRAISAL RIGHTS MAY RESULT IN TERMINATION OF SUCH RIGHTS. IN VIEW OF THE COMPLEXITY OF THESE PROVISIONS OF THE DELAWARE GENERAL CORPORATION LAW, MEMBERS WHO ARE CONSIDERING EXERCISING THEIR RIGHTS UNDER SECTION 262 SHOULD CONSULT WITH THEIR LEGAL ADVISORS.

Recommendation of the Restructuring Transaction by the CBOE Board of Directors

        On January 25, 2007, the CBOE board of directors determined, by vote, that the restructuring transaction is advisable and in the best interests of the CBOE and its members. On September 24, 2008, the CBOE board of directors approved the associated amendments to the CBOE's Constitution and Rules, and on May 6, 2009, the CBOE board of directors approved certain changes to the structure of the restructuring transaction. The CBOE board of directors recommends that CBOE members vote "FOR" the adoption of the agreement and plan or merger to effect the restructuring transaction at the CBOE's special meeting of members.

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UNAUDITED SELECTED CONDENSED CONSOLIDATED FINANCIAL DATA

        The following table sets forth selected consolidated financial and other information for the CBOE. You should read the following selected consolidated financial and other information together with our consolidated financial statements and the related notes, the unaudited pro forma condensed consolidated financial statements and other financial information included elsewhere in this document and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of this proxy statement and prospectus. We have derived the balance sheet data and operating data for the six months ended June 30, 2009 and 2008 from unaudited condensed consolidated financial statements and related notes included in Annex A of this proxy statement and prospectus. We have derived the balance sheet data as of December 31, 2008 and 2007, and operating data for the fiscal years ended December 31, 2008, 2007 and 2006 from the audited consolidated financial statements and related notes included in Annex A of this proxy statement and prospectus. We have derived the balance sheet data as of December 31, 2005 and 2004, and June 30, 2004 and the operating data for the fiscal year ended December 31, 2005, the six months ended December 31, 2005 and 2004, and the year ended June 30, 2004 from our audited consolidated financial statements which are not included in this proxy statement and prospectus. In 2004, the CBOE converted from a fiscal year that ended on June 30 to a fiscal year that ends on December 31. Because of this conversion, it was necessary for the CBOE to have a six-month reporting period ending December 31, 2004.


 
  Six Mos.
Ended
June 30,
2009

  Six Mos.
Ended
June 30,
2008

  Year
Ended
Dec 31,
2008

  Year
Ended
Dec 31,
2007

  Year
Ended
Dec 31,
2006

  Year
Ended
Dec 31,
2005

  Six Mos.
Ended
Dec 31,
2005

  Six Mos.
Ended
Dec 31, (1)
2004

  Year
Ended
June 30,
2004

   

 
  (dollars in thousands, except per share data)


Operating Data                                                          

Revenues                                                          

Transaction Fees   $ 160,424   $ 158,858   $ 342,516   $ 270,935   $ 186,285   $ 143,254   $ 75,457   $ 60,763   $ 116,344    

Other Member Fees     24,478     13,378     27,529     26,468     22,270     23,347     11,544     12,035     25,465    

OPRA Income     9,855     10,190     19,989     18,892     19,965     16,749     8,417     7,885     14,543    

Regulatory Fees     7,832     7,797     11,000     14,346     13,817     11,835     6,085     5,730     11,289    

Investment Income     892     4,126     6,998     8,031     4,743     2,016     1,208     369     338    

Other     4,462     7,541     15,749     13,629     10,906     5,854     3,168     2,144     5,735    

Total Revenues     207,943     201,890     423,781     352,301     257,986     203,055     105,879     88,926     173,714    

Expenses                                                          

Employee Costs     41,213     37,441     83,140     83,538     79,782     74,678     38,545     33,155     69,304    

Depreciation & Amortization     13,769     13,142     25,633     25,338     28,189     28,349     14,372     15,950     29,685    

Data Processing     10,251     8,891     20,556     19,612     19,078     19,304     9,736     9,169     18,022    

Outside Services     14,085     11,956     27,370     23,374     20,455     18,404     10,730     8,934     15,242    

Royalty Fees     15,781     16,233     35,243     28,956     23,552     21,950     10,676     8,997     15,847    

Trading Volume Incentives     12,502     6,907     15,437     5,108     2,186     0     0     0     0    

Travel & Promotional Expenses     5,423     5,269     10,483     9,640     7,209     6,796     3,458     2,869     6,406    

Facilities Costs     2,617     1,594     4,045     4,306     4,281     3,925     2,272     1,978     4,389    

Net Loss from Investment in Affiliates     477     410     882     939     757     203     (471 )   1,391     4,359    

Impairment of Investment in Affiliate and Other Assets     0     0     0     0     121     2,757     1,832     1,169     2,453    

Other     3,943     3,375     7,585     11,539     349     6,796     3,512     2,881     5,352    

Total Expenses     120,061     105,218     230,374     212,350     185,959     183,162     94,662     86,493     171,059    

Income Before Income Taxes     87,882     96,672     193,407     139,951     72,027     19,893     11,217     2,433     2,655    

Provision for Income Taxes                                                          

Current     37,466     41,173     78,325     57,724     34,495     9,925     5,540     (1,454 )   1,333    

Deferred     (1,971 )   (512 )   (206 )   (941 )   (4,576 )   (927 )   (508 )   2,694     (329 )  

Total Provision for Income Taxes     35,495     40,661     78,119     56,783     29,919     8,998     5,032     1,240     1,004    

Net Income   $ 52,387   $ 56,011   $ 115,288   $ 83,168   $ 42,108   $ 10,895   $ 6,185   $ 1,193   $ 1,651    

60




 


 

Six Mos.
Ended
June 30,
2009


 

Six Mos.
Ended
June 30,
2008


 

Year.
Ended
Dec 31,
2008


 

Year
Ended
Dec 31,
2007


 

Year
Ended
Dec 31,
2006


 

Year
Ended
Dec 31,
2005


 

Six Mos.
Ended
Dec 31,
2005


 

Six Mos.
Ended
Dec 31, (1)
2004


 

Year
Ended
June 30,
2004


 



 


 


(dollars in thousands, except per share data)


 


Balance Sheet Data                                                        

Total assets   $ 553,118   $ 419,194   $ 496,139   $ 341,695   $ 255,826   $ 202,185   $ 202,185   $ 198,967   $ 176,234  

Total liabilities     118,974     96,815     114,479     75,328     72,437     61,277     61,277     64,127     42,587  

Total equity     434,144     322,379     381,660     266,367     183,389     140,908     140,908     134,840     133,647  

Pro forma Data—                                                        

Net income (loss) per share (2)     [       ]   [       ]   [       ]   [       ]   [       ]   [       ]   [       ]   [       ]   [      ]  

Working capital (3)   $ 320,544   $ 227,655   $ 270,297   $ 173,963   $ 94,081   $ 59,912   $ 59,912   $ 42,911   $ 36,788  

Capital expenditures (4)     20,752     16,374     43,816     32,095     28,700     21,011     10,948     15,462     23,334  

Number of full time employees at the end of the period     596     578     576     586     626     673     673     686     698  

Sales price per CBOE Seat                                                        

High   $ 1,900   $ 3,300   $ 3,300   $ 3,150   $ 1,775   $ 875   $ 875   $ 420   $ 340  

Low   $ 1,200   $ 2,225   $ 1,750   $ 1,800   $ 850   $ 299   $ 600   $ 270   $ 190  

(1)
In 2004, the CBOE converted its fiscal year from the year ending June 30 to the year ending December 31. Because of this transition, the CBOE reported results for the six months ended December 31, 2004.

(2)
Based on [            ] shares issued and outstanding immediately following the completion of the restructuring transaction.

(3)
Equals current assets minus current liabilities.

(4)
Does not include new investments in affiliates or the disposition of interests in affiliates.

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CBOE MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

        The following discussion of the CBOE's financial condition and results of operations should be read in conjunction with the consolidated financial statements of the CBOE and the notes thereto included in this proxy statement and prospectus. The following discussion contains forward-looking statements. Actual results could differ materially from the results discussed in the forward-looking statements. See "Risk Factors" and "Forward-Looking Statements" above.

Overview

        The primary business of the CBOE is the operation of markets for the trading of listed options contracts for three broad product categories: the stocks of individual corporations (equity options), securitized baskets of equity (exchange-traded funds) and stock market indices (index options). In addition to traditional open outcry markets, we offer electronic trading through our hybrid trading model that operates on a proprietary technology platform known as CBOEdirect, which was developed and implemented, beginning in June 2003. Until June 2003, the majority of all of our options trading was conducted in an open outcry environment. We derive a substantial portion of our revenue from exchange fees relating to the trading in our markets; these fees accounted for 80.8% of our total revenues in 2008. Other revenues are generated by dues payments and user fees from our members, from the sale of market data generated by trading in our markets, and regulatory related fees, which accounted for 6.5%, 4.7% and 2.6%, respectively, of our total revenue in calendar year 2008. In general, our revenues are primarily driven by the number of contracts traded on the exchange. In order to increase the volume of contracts traded on our markets, we strive to develop and promote contracts designed to satisfy the trading, hedging and risk-management needs of our market participants.

        It is important to note that up until January 1, 2006, the CBOE operated generally as a non-profit organization. Our fee schedules and expense budgets were designed to achieve a break-even operation. When volume and revenue exceeded budgeted levels, transaction fees were generally reduced to avoid generating surpluses beyond the CBOE's needs for working capital. As of January 1, 2006, the Board of Directors of the CBOE instructed management to begin a transition to operating the CBOE on a for-profit basis. Therefore, the historical financial information provided herein will not necessarily be indicative of future performance and should be read in that context.

        The largest source of the CBOE's operating revenues is transaction fee revenue. Transaction fee revenue is a function of three variables: (1) exchange fee rates, determined for the most part by contract type; (2) trading volume; and (3) transaction mix between contract type (member versus non-member). Because our trading fees are assessed on a per contract basis, our exchange fee revenues are highly correlated to the volume of contracts traded on our markets. While exchange fee rates are established by the CBOE, trading volume and transaction mix are primarily influenced by factors outside the CBOE's control. These external factors include: price volatility in the underlying securities and national and international economic and political conditions. This category of revenue accounted for 80.8%, 76.9% and 72.2%, of our total revenue in 2008, 2007 and 2006, respectively, and 77.2% and 78.7% for the six months ended June 30, 2009 and 2008, respectively.

        Recent years have seen a steady increase in the total trading volume on U.S. options exchanges. According to the Options Clearing Corporation, or OCC, total options contract volume in 2004, 2005, 2006, 2007 and 2008 was, respectively, 1.2 billion, 1.5 billion, 2.0 billion, 2.9 billion and 3.6 billion contracts, representing year-over-year growth of 27% in 2005, 35% in 2006, 41% in 2007 and 25% in 2008. The CBOE has also experienced consistent increases in trading volumes over the last several years. Total volume at the CBOE was 361.1 million, 468.2 million, 674.7 million, 944.5 million and

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1,193.4 million contracts traded in 2004, 2005, 2006, 2007 and 2008, respectively, representing annual growth of 30% in 2005, 44% in 2006, 40% in 2007 and 26% in 2008. Contract trading volume levels in 2005, 2006, 2007 and 2008 were consecutive CBOE record highs. Revenue is recorded as transactions occur on a trade-date basis.

        The options industry has not gone untouched by the financial crisis that unfolded in the fall of 2008. Most participants in the options markets, including major investment banks, hedge funds and institutional and retail investors, suffered reductions in their asset and capital bases and generally modified their trading activity. As a result, during the first six months of 2009, the growth in options trading has not kept pace with the historical trend. Total volume on U.S. options exchanges through the first six months of 2009 is up 5% compared with the same period in 2008, and CBOE's comparable volume is up 2%. For the first six months of 2009, CBOE's volume averaged 4.6 million contracts per day, up 3% from the same period in 2008. In addition, CBOE's market share for the first six months of 2009 declined 70 basis points to 31.4% compared with 32.1% for the same period in 2008.

        The following chart illustrates trading volume across the different categories of products traded at the CBOE for the first six months of 2009 and 2008:

 
   
   

 
  Options Contract Volume
   
Six Months Ended June 30
  2009
  2008

Equity   323,677,124   293,179,709

Cash Index   106,224,781   115,466,076

Exchange Traded Funds   140,078,912   149,113,640

Total   569,980,817   557,759,425

        The following chart illustrates annual trading volume across the different categories of products traded at the CBOE:

 
   
   
   
   
   
 

 
  Annual Options Contract Volume
 
   
 
  2008
  2007
  2006
  2005
  2004
 

Equities   604,024,956   500,964,713   390,657,577   275,646,980   224,316,863  

Cash Indexes   259,499,726   230,527,970   157,596,679   115,723,454   85,510,875  

Exchange Traded Funds   329,830,388   212,979,241   126,481,092   76,878,867   51,259,036  

Total   1,193,355,070   944,471,924   674,735,348   468,249,301   361,086,774  

        The equities category reflects trading in options contracts on the stocks of individual companies. Cash indexes include cash-settled options contracts on market indexes and on the interest rate of U.S. Treasury Securities. Exchange traded funds (ETFs) are baskets of stocks designed to generally track an index, but which trade like individual stocks.

        The growth in trading volume at the CBOE is attributable to growth in trading volume of cash index options, ETFs and equity based securities. Within our cash index products, 69% of the volume and 72% of the increase in volume from 2007 to 2008 is attributable to contracts on our proprietary S&P 500, or SPX contract, our largest product. Within our ETF products, 29% of the volume and 41% of the increase in volume from 2007 to 2008 is attributable to contracts on the Standard & Poor's Depository Receipts, or SPY contract, our second highest volume product in 2008. We believe that the recent growth in trading volume is due to industry-wide factors, as well as CBOE-specific factors.

        Increasing investor sophistication and focus on risk management and improved accessibility through continued technological improvements have resulted in an increase in the use of options by those institutions and individuals who have traditionally invested in cash-based security markets. In addition, our markets have attracted a number of new investors focused on non-traditional forms of investments, including hedge funds.

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        For CBOE specifically, our strong product offerings, as well as the implementation of our hybrid trading platform, resulted in greater than industry average growth for the years ended December 2004 through December 2008, with a compounded annual growth rate of 32% for the industry compared with 35% for CBOE, according to data from OCC. For the same time period, CBOE's market share has increased from 30.5% in 2004 to 33.3% in 2008.

        While there is no certainty, we expect that the industry-wide and CBOE-specific factors that contributed to past volume increases will continue to contribute to future volume levels. Therefore, if these same factors continue to exist, we may experience similar increases in contract trading volume. However, additional factors may arise that could offset future increases in contract trading volume or result in a decline in contract trading volume, such as new or existing competition or other events. Accordingly, our recent contract trading volume history may not be an indicator of future contract trading volume results.

        Other member fees include membership dues, user fees related to certain services provided to members on our trading floor, access fees assessed to Interim Trading Permit holders and temporary members and application fees charged to new members and existing members under certain circumstances. The Interim Trading Permit program was initiated in July of 2008 and the revenue from this program was included in other for the 2008 fiscal year. CBOE has assessed access fees to temporary members since July of 2007, but the revenue recognition has been deferred pending the resolution of the Exercise Right Settlement Agreement. The Delaware Court issued a Memorandum Opinion in June 2009 approving the Settlement Agreement. Based on the favorable settlement ruling CBOE, in June 2009, recognized as revenue the fees assessed to temporary members for the first six months of 2009 that were not subject to the fee-based payment under the Settlement Agreement. Access fees assessed temporary members prior to 2009 and ongoing fees collected that qualify for the fee-based payments under the Settlement Agreement will remain in escrow and CBOE will recognize as revenue any fees not required to be paid to the Participating Group A Settlement Class Members under the Settlement Agreement upon the final, non-appealable resolution of the Settlement Agreement. Revenue from other member fees has been flat to trending down as a greater number of our market participants access CBOE through electronic means rather than in an open outcry environment. This category of revenue accounted for 6.5%, 7.5% and 8.6% of our total revenue in 2008, 2007 and 2006, respectively, and 11.8% and 6.7% for the six months ended June 30, 2009 and 2008, respectively.

        OPRA Income represents the sale of our transaction information, often referred to as market data, through the Options Price Reporting Authority, or OPRA. OPRA is not consolidated with CBOE. OPRA gathers market data from various options exchanges, including CBOE, and, in turn, disseminates this data to third parties who pay fees to OPRA to access the data. As a participant exchange, we are members of a committee with other participant exchanges that administers the OPRA Plan. Revenue generated by OPRA from the dissemination of market data is shared among OPRA's participants according to the relative number of trades executed by each of the participant exchanges as calculated each quarter. A trade consists of a single transaction, but may consist of several contracts. Each participant exchange's share of market data revenue generated by OPRA is calculated on a per trade basis and is not based on the underlying number of contracts. This category of revenue accounted for 4.7%, 5.3% and 7.7% of our total revenue in 2008, 2007 and 2006, respectively, and 4.7% and 5.0% for the first six months of 2009 and 2008, respectively.

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        We charge fees to our members and member firms in support of our regulatory responsibilities as a self regulatory organization under the Exchange Act of 1934. Historically, most of this revenue was based on the number of registered representatives that a CBOE member firm maintained. In 2008, CBOE eliminated the Registered Representative Fee and announced a new fee structure that was implemented in 2009, under which regulatory fees are based on the number of customer contracts executed by member firms. CBOE began charging the customer contracts-based Options Regulatory Fee as of March 1, 2009. CBOE expects the amount of revenue collected from the Options Regulatory Fee to be approximately the same as the amount of revenue collected from the former Registered Representative Fee. This source of revenue could decline in the future if the number of customer contracts executed by CBOE member firms declines and rates are not increased. This category of revenue accounted for 2.6%, 4.1% and 5.4% of our total revenue in 2008, 2007 and 2006, respectively, and 3.8% and 3.9% for the six months ended June 30, 2009 and 2008, respectively.

Investment Income

        Investment income represents our return from the investment of our excess cash. Currently, CBOE invests its excess cash in highly liquid, short-term investments, such as money market funds. Historically, we have also invested our cash in highly-liquid, investment grade commercial paper, corporate bonds and U.S. Treasuries. Our highest priority in making investment decisions is to assure the preservation of principal and secondary to retain liquidity to meet projected cash requirements and maximize yield within the specified quality and maturity restrictions. Investment income accounted for 1.7%, 2.3% and 1.9% of our total revenue in 2008, 2007 and 2006, respectively, and 0.4% and 2.0% for the first six months of 2009 and 2008, respectively.

        Other revenues accounted for 3.7%, 3.9% and 4.2% of our total revenue in 2008, 2007 and 2006, respectively, and 2.1% and 3.7% for the six months ended June 30, 2009 and 2008, respectively. The following sub-categories represent the largest source of revenue within other revenues:

Components of Expenses

        Our expenses generally support our open outcry markets and hybrid trading systems and are mainly fixed in nature, meaning that the overall expense structure is generally independent of trading volume. Salaries and benefits represent our largest expense category and tend to be driven by both our staffing requirements and the general dynamics of the employment market. Other significant operating expenses in recent years have been expenses associated with enhancements to our trading systems, royalty fees to licensors of licensed products, trading volume incentives and costs related to outside services.

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Results of Operations

        The following table sets forth our unaudited condensed consolidated statements of income data for periods presented as a percentage of total revenue.

 
   
   
   
   
   
   
   
   
   
   

 
  Six Mos.
Ended
June 30,
2009

  Six Mos.
Ended
June 30,
2008

  Year
Ended
Dec 31,
2008

  Year
Ended
Dec 31,
2007

  Year
Ended
Dec 31,
2006

  Year
Ended
Dec 31,
2005

  Six Mos.
Ended
Dec 31,
2005

  Six Mos.
Ended
Dec 31,
2004

  Year
Ended
June 30,
2004

   

Operating Data                                        
Revenues                                        
Transaction Fees   77.2 % 78.7 % 80.8 % 76.9 % 72.2 % 70.5 % 71.3 % 68.3 % 67.0 %  
Other Member Fees   11.8 % 6.7 % 6.5 % 7.5 % 8.6 % 11.5 % 10.9 % 13.5 % 14.7 %  
OPRA Income   4.7 % 5.0 % 4.7 % 5.3 % 7.7 % 8.2 % 7.9 % 8.9 % 8.4 %  
Regulatory Fees   3.8 % 3.9 % 2.6 % 4.1 % 5.4 % 5.8 % 5.7 % 6.4 % 6.5 %  
Investment Income   0.4 % 2.0 % 1.7 % 2.3 % 1.9 % 1.0 % 1.1 % 0.4 % 0.1 %  
Other   2.1 % 3.7 % 3.7 % 3.9 % 4.2 % 3.0 % 3.1 % 2.5 % 3.3 %  

Total Revenues   100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %  
Expenses                                        
Employee Costs   19.8 % 18.6 % 19.6 % 23.7 % 30.9 % 36.8 % 36.4 % 37.3 % 39.9 %  
Depreciation & Amortization   6.6 % 6.5 % 6.0 % 7.2 % 11.0 % 14.0 % 13.6 % 17.9 % 17.1 %  
Data Processing   4.9 % 4.4 % 4.9 % 5.6 % 7.4 % 9.5 % 9.2 % 10.3 % 10.4 %  
Outside Services   6.8 % 5.9 % 6.5 % 6.6 % 7.9 % 9.1 % 10.1 % 10.0 % 8.8 %  
Royalty Fees   7.6 % 8.0 % 8.3 % 8.2 % 9.1 % 10.8 % 10.1 % 10.1 % 9.1 %  
Trading Volume Incentives   6.0 % 3.4 % 3.6 % 1.4 % 0.8 % 0 % 0 % 0 % 0 %  
Travel & Promotional Expenses   2.6 % 2.6 % 2.5 % 2.8 % 2.8 % 3.3 % 3.3 % 3.2 % 3.7 %  
Facilities Costs   1.3 % 0.8 % 1.0 % 1.2 % 1.7 % 1.9 % 2.1 % 2.2 % 2.5 %  
Net Loss from Investment in Affiliates   0.2 % 0.2 % 0.2 % 0.3 % 0.3 % 0.1 % (0.4 %) 1.6 % 2.5 %  
Impairment of Investment in Affiliate and Other Assets   0 % 0 % 0 % 0 % 0 % 1.4 % 1.7 % 1.3 % 1.4 %  
Other   1.9 % 1.7 % 1.8 % 3.3 % 0.2 % 3.3 % 3.3 % 3.3 % 3.1 %  

Total Expenses   57.7 % 52.1 % 54.4 % 60.3 % 72.1 % 90.2 % 89.4 % 97.2 % 98.5 %  
Income Before Income Taxes   42.3 % 47.9 % 45.6 % 39.7 % 27.9 % 9.8 % 10.6 % 2.8 % 1.5 %  
Provision for Income Taxes   17.1 % 20.2 % 18.4 % 16.1 % 11.6 % 4.4 % 4.8 % 1.4 % 0.5 %  

Net Income   25.2 % 27.7 % 27.2 % 23.6 % 16.3 % 5.4 % 5.8 % 1.4 % 1.0 %  

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Six months ended June 30, 2009 compared to the six months ended June 30, 2008

Overview

        For the six months ended June 30, 2009, net income decreased 6.5% to $52.4 million from $56.0 million in the same period a year ago. As a percent of total revenues, net income decreased to 25.2% for the first six months of 2009 compared with 27.7% for the same six-month period in 2008. The decrease in net income was due to the net effect of a 14.1% increase in expenses for the first six months of 2009, partially offset by 3.0% growth in revenues, compared with the same period in 2008.

Recent Events

        The Delaware Court issued a Memorandum Opinion in June 2009 approving the Settlement Agreement. Based on the favorable settlement ruling CBOE, in June 2009, recognized as revenue the fees assessed to temporary members for the first six months of 2009 that were not subject to the fee-based payment under the Settlement Agreement, totaling $8.3 million. Access fees assessed temporary members prior to 2009 and ongoing fees collected that qualify for the fee-based payments under the Settlement Agreement will remain in escrow and CBOE will recognize as revenue any fees not required to be paid to the Participating Group A Settlement Class Members under the Settlement Agreement upon the final, non-appealable resolution of the Settlement Agreement. On July 29, 2009, the Delaware Court entered a final order approving the Settlement Agreement. The order is subject to any appeals that may be filed by August 28, 2009.

Revenues

        Total revenues for the six months ended June 30, 2009 were $207.9 million, an increase of $6.0 million, or 3.0%, compared with the same period in 2008. The increase primarily was attributable to higher other member fees and volume-related transaction fees, which increased by $11.1 and $1.5 million, respectively. These increases were partially offset by decreases in investment income and other of $3.2 and $3.0 million, respectively. The increase in other member fees is largely attributed to the recognition of certain temporary member access fees for the first six months of 2009. Total options contract volume was up 2%, with 570.0 million contracts traded for the first six months of 2009 compared with 557.8 million contracts for the same period in 2008. Investment income declined $3.2 million during the first six months of 2009 compared with the year ago period due to lower yields on investments resulting from significantly lower interest rates. Other revenue declined $3.0 million largely due to lower revenues from order routing cancel fees and internet advertising associated with CBOE's website.

        Transaction fees revenue is a function of three variables: (1) exchange fee rates, determined for the most part by contract type; (2) trading volume; and (3) transaction mix between contract type. Since fees are assessed on a per contract basis, transaction fees are highly correlated to contract volume and mix. Transaction fees increased 1% to $160.4 million for the six months ended June 30, 2009, representing 77.2% of total revenues, compared with $158.9 million for the prior-year period, or 78.7% of total revenues. This increase was largely driven by a 2.0% increase in trading volume slightly offset by a decrease in the average transaction fee per contract. CBOE's average daily volume was 4.60 million contracts for the first six months of 2009 compared with 4.46 million contracts for the first six months of 2008. The average transaction fee per contract was $0.281 and $0.285 for the first six months of 2009 and 2008, respectively, a decrease of 1%. The decrease in the average transaction fee per contract reflects a higher percentage of total transaction volume in options products with lower transaction fees in 2009 compared to 2008 and the impact of fee waivers implemented in response to competitive pricing for transactions which has generally decreased per contract transaction fees. In

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general, CBOE faces continued downward pressure on transaction fees in the markets in which it competes.

        Other member fees are mostly fixed with certain services being influenced by trading volume or defined metrics. Other member fees for the six months ended June 30, 2009 increased 83% to $24.5 million from $13.4 million in the comparable period last year, representing 11.8% and 6.7% of total revenues for 2009 and 2008, respectively. Other member fees primarily represent member dues, member user fees, systems services and, for 2009, temporary member access fees and interim trading permit revenue. The increase in other member fees primarily resulted from the recognition of $8.3 million in temporary member access fees and $2.8 million in interim trading permit revenue. CBOE instituted the interim trading permit program in July 2008.

        OPRA income decreased 3% to $9.8 million for the first six months of 2009 from $10.2 million in the same period last year. As a percent of total revenues, this category accounted for 4.7% and 5.0% of total revenues for the first six months of 2009 and 2008, respectively. OPRA income, or market data fees, is allocated through OPRA based on each exchange's share of total options transactions cleared. The decrease in revenue is due to a decrease in CBOE's share of total options transactions cleared. CBOE's share of OPRA income for the first six months of 2009 decreased to an average of 30.8% from 32.1% for the same period in 2008. This represents a decrease of 130 basis points for the first six months of 2009 compared with the prior-year period.

        Regulatory fees for each of the first six months of 2009 and 2008 were $7.8 million, representing 3.8% and 3.9% of total revenues, respectively. In 2009, CBOE implemented a new fee structure under which regulatory fees are based on the number of customer contracts executed by member firms rather than the number of registered representatives. The change in fee structure did not materially affect the revenue recognized during the six months ended June 30, 2009 as compared to 2008.

        Investment income was $0.9 million for the six months ended June 30, 2009, representing a 78% decline compared with $4.1 million for the same period last year. As a percent of total revenues, this category accounted for 0.4% and 2.0% of total revenues for the six months ended June 30, 2009 and 2008, respectively. The drop in investment income was due to lower yields realized on higher invested cash in the current year period compared with 2008. The investment yield fell as a result of significantly lower interest rates.

        Other was $4.5 million for the first six months of 2009 compared with $7.5 million for the comparable period in 2008, representing a decline of $3.0 million. This category accounted for 2.1% and 3.7% of total revenues for the six months ended June 30, 2009 and 2008, respectively. The primary factors contributing to the decline were lower revenue generated from order routing cancel fees of $2.6 million and a decrease in internet advertising associated with CBOE's website of $0.5 million.

Expenses

        Total expenses increased $14.8 million, or 14.1%, to $120.0 million for the first six months of 2009 from $105.2 million in the year ago period. This increase was primarily due to higher employee costs,

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depreciation and amortization, data processing, outside services, trading volume incentives, facilities costs and other expenses, partially offset by a decrease in royalty fees. Expenses increased to 57.7% of total revenues in the first six months of 2009, compared with 52.1% in the same period in 2008. The increase in expenses, partially offset by the growth in revenues, resulted in a decrease in CBOE's operating margin (income before income taxes as a percentage of total revenues) to 42.3% for the six months ended June 30, 2009 from 47.9% in the same period for 2008.

        For the first six months of 2009, employee costs were $41.2 million, or 19.8% of total revenues, compared with $37.4 million, or 18.6% of total revenues, in the same period in 2008. This represents an increase of $3.8 million or 10.2%, primarily due to an increase in the number of employees and pay increases granted in the second quarter of 2008. CBOE had 596 employees at June 30, 2009 compared with 578 at the end of June 2008. The increase primarily reflects employees hired to support C2, which is expected to launch in late 2009 or early 2010. Higher accrued expenses for projected incentive awards through the first six months of 2009 as compared to the same period in 2008 also contributed to the increase in employee costs.

        Depreciation and amortization increased by $0.7 million to $13.8 million for the first six months of 2009 compared with $13.1 million for the same period in 2008, primarily reflecting additions to fixed assets placed in service in 2008 and 2009. Additions were primarily purchases of systems hardware and software to enhance CBOE's systems functionality and expand capacity. Depreciation and amortization charges represented 6.6% and 6.5% of total revenues for the first six months of 2009 and 2008, respectively.

        Data processing expenses increased to $10.2 million for the first six months of 2009 compared with $8.9 million in the prior-year period, representing 4.9% and 4.4% of total revenues in the first six months of 2009 and 2008, respectively. The $1.3 million increase primarily reflects higher data center costs relating to C2 for maintenance, software and disaster recovery and hosting expenses.

        Expenses related to outside services increased to $14.1 million for the first six months of 2009 from $12.0 million in the prior-year period and represented 6.8% and 5.9% of total revenues, respectively. The $2.1 million increase primarily reflects higher consulting costs of $1.5 million for systems and software development, largely related to the development of C2, and an increase in legal expenses of $0.5 million. The increase in legal expenses in 2009 compared to 2008 is primarily due to an insurance reimbursement received in 2008's first six months, which reduced legal expenses for that period by $1.4 million compared to a 2009 insurance reimbursement of $0.7 million. Excluding the insurance reimbursements, legal expenses decreased due to lower expenses for litigation, largely as a result of the Settlement Agreement.

        Royalty fees expense for the first six months of 2009 were $15.8 million compared with $16.2 million for the prior year period, a decrease of $0.4 million or 2.5%. This decrease is directly related to lower trading volume in CBOE's licensed options products during the first six months of 2009 compared with 2008. Royalty fees represented 7.6% and 8.0% of total revenues for the first six months of 2009 and 2008, respectively.

        Trading volume incentives increased $5.6 million to $12.5 million for the first six months of 2009 compared to $6.9 million for the same period a year ago, representing 6.0% and 3.4% of total revenues in the first six months of 2009 and 2008, respectively. The increase in trading volume incentives reflects higher costs incurred for a designated primary market maker (DPM) linkage program and a liquidity provider rebate program. The market linkage program reimburses DPMs for the cost of linking customer orders to markets at other exchanges. Market linkage expenses can vary based on volume and fees charged by other exchanges. The liquidity provider rebate program provides incentives to market participants for executing orders at CBOE as opposed to routing to away markets.

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        Facilities costs for the six months ended June 30, 2009 were $2.6 million, an increase of $1.0 million. The increase in 2009 compared to 2008 was primarily due to a non-recurring real estate tax refund received in the prior year of $0.9 million. Facilities costs represented 1.3% and 0.8% of total revenues for the first six months of 2009 and 2008, respectively.

        Net loss from investment in affiliates was $0.5 million for the six months ended June 30, 2009 compared with $0.4 million for the same period in 2008, reflecting CBOE's share of the operating losses of OneChicago.

        Other expenses totaled $3.9 million for the first six months of 2009, an increase of $0.5 million from the year ago period, primarily due to fees related to CBOE's credit facility. On December 23, 2008, CBOE entered into a senior credit facility with three financial institutions. The credit agreement is a three-year revolving credit facility of up to $150 million and expires on December 23, 2011. CBOE pays a commitment fee on the unused portion of the facility. As of June 30, 2009, there were no borrowings against the credit facility. Availability under this facility is contingent upon the final, non-appealable resolution of the Settlement Agreement. Other expenses were 1.9% and 1.7% of total revenues for the six months ended June 30, 2009 and 2008, respectively.

        For the six months ended June 30, 2009, the provision for income taxes was $35.5 million compared with $40.7 million for the same period in 2008. This decrease is directly related to the decline in income before taxes and a decrease in the effective tax rate. The effective tax rate was 40.4% and 42.1% for the six months ended June 30, 2009 and 2008, respectively. The effective tax rate for the first six months of 2009 was lower than the comparable 2008 period, primarily due to lower permanent differences.

Year ended December 31, 2008 compared to the year ended December 31, 2007

Overview

        For the year ended December 31, 2008 net income increased 39% to $115.3 million from $83.2 million in the same period last year. Expressed as a percent of total revenues, net income rose to 27.2% for the full-year 2008 compared with 23.6% for the prior year period. The increase in net income for 2008 compared with 2007 was primarily due to record trading volume accompanied by disciplined expense management, resulting in improved operating income.

Revenues

        Consolidated total revenues for the year ended December 31, 2008 were $423.8 million, an increase of $71.5 million, or 20%, compared with the same period in 2007. The revenue increase was driven by higher volume-related transaction fees, which rose by $71.6 million, and increases in other member fees, OPRA income and other of $1.1 million, $1.1 million and $2.1 million, respectively. This increase was offset somewhat by lower revenue from regulatory fees of $3.4 million and investment income of $1.0 million. Total options contract volume was up 26%, with 1,193.4 million contracts traded for the full-year 2008 compared with 944.5 million contracts for the 2007 year.

        Transaction fees grew 26% to $342.5 million for the year ended December 31, 2008, representing 80.8% of total revenues, compared with $270.9 million for the same period last year, or 76.9% of total revenues. This growth was driven by record trading volume, as CBOE handled in excess of one billion contracts, representing a 26% increase over 2007. CBOE's average daily volume was 4.72 million contracts for 2008, a 25% increase compared with last year's average daily volume of 3.76 million contracts. The average transaction fee per contract of $0.287 was unchanged from 2007's average.

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        Other member fees increased 4% to $27.5 million for the 2008 fiscal year from $26.5 million in 2007, representing 6.5% and 7.5% of total revenues for 2008 and 2007, respectively. Other member fees primarily represent member dues, member user fees and systems services which are mostly fixed and are not directly influenced by trading volume. In 2008, higher fees generated from systems services of $1.4 million partially offset lower fees associated with membership dues and trading floor charges of $0.7 million.

        The increase of $1.4 million in systems services revenue was primarily driven by a new co-location fee implemented in 2008 totaling $1.3 million, which is assessed to firms for locating their trading systems in close proximity to CBOE's systems and trading floor. In addition, revenue from trade match reports increased to $1.2 million due to higher demand for that service, which is correlated to trading volume. The decline in membership dues and trading floor charges of $0.7 million is primarily due to: (1) a drop in the number of members, with fewer CBOE Temporary Members (former members who previously had obtained membership through use of the Exercise Right) trading at CBOE, (2) changes in CBOE's member fee structure and (3) the shift in members accessing our trading environment remotely rather than through open outcry on our trading floor. With the number of members on the floor going down, revenue from user-based fees such as trading floor booths and telecommunications services provided by CBOE have declined as well.

        OPRA income rose 6% to $20.0 million for the year ended December 31, 2008 from $18.9 million in 2007. As a percent of total revenues this category accounted for 4.7% of total revenues for the 2008 year compared with 5.3% in 2007. OPRA income, or market data fees, is allocated through OPRA based on each exchange's share of total options transactions cleared. CBOE's share of total options transactions cleared decreased about 1 percentage point for the year ended December 31, 2008 compared with the prior year. However, this decline was more than offset by an 11% rise in OPRA's net distributable revenue for the full-year 2008 compared with 2007.

        Regulatory fees decreased 23% to $11.0 million for the year ended December 31, 2008 compared with $14.3 million for the year 2007. As a percent of total revenues this category accounted for 2.6% and 4.1% of total revenues for years 2008 and 2007, respectively. The decline was due to lower registered representative renewal fees recognized in 2008 compared with 2007, primarily due to a change in CBOE's regulatory fee structure.

        Investment income was $7.0 million (1.7% of total revenues) for 2008, representing a decline of 13% when compared with $8.0 million (2.3% of total revenues) for 2007. This decrease is attributable to lower yields on investments resulting from a decline in interest rates during 2008. The impact of lower yields was offset to some degree by an increase in funds available for investment in 2008.

        Other totaled $15.8 million (3.7% of total revenues) for 2008 compared with $13.6 million (3.9% of total revenues) for 2007. The main factors contributing to the increase in other revenue were the contribution from access fees charged interim permit users of $2.6 million, a new program initiated in 2008 and higher revenue of $0.3 million attributable to the licensing of CBOE's proprietary indexes partially offset by a decline in market data revenue of $0.7 million and a decrease of $0.5 million in license fee assessments related to a member firm fee cap program that was modified in 2007. In 2007,

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CBOE implemented new transaction fee surcharges on certain licensed products, and at the same time, reduced the license fee assessment to mitigate charges to those firms that exceeded the trading cap.

Expenses

        Total expenses increased 8% to $230.4 million for the 2008 fiscal year compared with $212.4 million in 2007. The increase primarily was due to higher trading volume incentives, royalty fees and costs related to outside services. Expenses as a percent of total revenues decreased to 54.4% in 2008 from 60.3% in 2007. Growth in revenues exceeded the increase in expenses, resulting in an increase in CBOE's operating margin to 45.6% for the year ended December 31, 2008 from 39.7% for the year ended December 31, 2007.

        For the year ended December 31, 2008, employee costs were $83.1 million or 19.6% of total revenues, representing our largest expense category. For 2007, employee costs were $83.5 million or 23.7% of total revenues. CBOE had 576 employees at December 31, 2008 compared with 586 at December 31, 2007. In 2008, employee costs were down $0.4 million, or nearly 1%, compared with 2007. This variance primarily reflects a $2.1 million decrease in severance expense partially offset by a $1.4 million increase in annual employee incentive awards, which are aligned with CBOE's improved financial performance.

        Expenses related to outside services increased to $27.4 million for the 2008 fiscal year compared with $23.4 million in 2007, representing 6.5% and 6.6% of total revenues for 2008 and 2007, respectively. The $4.0 million increase in expenses for outside services in 2008 compared with 2007 resulted primarily from an increase in consulting fees for systems and software development of $4.3 million, largely related to systems development for C2. C2 is CBOE's alternative exchange initiative that is expected to launch in late 2009 or early 2010.

        Royalty fees expense for 2008 increased to $35.2 million from $29.0 million for the 2007 fiscal year. This increase is directly related to the growth in the trading volume of CBOE's licensed options products. Royalty fees increased to 8.3% of total revenues in 2008 from 8.2% in 2007, as the trading volume in licensed products increased at a higher rate relative to non-licensed products in 2008 compared with 2007.

        Trading volume incentives increased to $15.4 million in 2008 compared with $5.1 million in 2007, an increase of $10.3 million. The higher expense mainly resulted from a market linkage program for designated primary market makers (DPMs). This program reimburses DPMs for the cost of linking customer orders to markets at other exchanges. Market linkage expenses can vary based on volume and fees charged by other exchanges. Another factor was the cost related to a new liquidity provider rebate program, which provides incentives to market participants for executing orders at CBOE as opposed to routing to away markets. As a percent of total revenues, trading volume incentives increased to 3.6% for the 2008 fiscal year from 1.4% for 2007.

        Travel and promotional expense increased to $10.5 million for 2008 from $9.6 million for the prior year. The increase was mainly due to higher expenditures for special events of $0.3 million and advertising of $0.7 million, primarily to support CBOE's branding initiatives, new product introductions and promotions. In 2007, CBOE launched a new branding initiative to build awareness and illustrate its leadership position in the options marketplace. As a percent of total revenues, travel and promotion expenses declined to 2.5% for the 2008 fiscal year from 2.8% for 2007.

        Net loss from investment in affiliates was $0.9 million for each of the years ended December 31, 2008 and 2007. This loss primarily relates to CBOE's share of the operating losses of OneChicago.

        Other expenses totaled $7.6 million for 2008, a decrease of $3.9 million from the prior year expense of $11.5 million. The decrease primarily resulted from a $3.6 million loss incurred from the

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sale of our investment in HedgeStreet in 2007, with no corresponding loss in 2008. For a further discussion, please see "Business—Other Business Relationships" on page 102.

        For the year ended December 31, 2008, the provision for income taxes was $78.1 million compared with $56.8 million for 2007. This increase is directly related to the increase in income before taxes. The effective tax rate was relatively unchanged at 40.4% and 40.6% for 2008 and 2007, respectively.

Year ended December 31, 2007 compared to the year ended December 31, 2006

Overview

        For the year ended December 31, 2007, net income increased $41.1 million, or 98%, to $83.2 million (23.6% of total revenues) from $42.1 million (16.3% of total revenues) for the year ended December 31, 2006, primarily driven by higher trading volume while also benefiting from strong expense controls. Options contract volume totaled 944.5 million contracts traded in 2007 compared with 674.7 million contracts in 2006, a 40% increase.

Revenues

        Consolidated total revenues for the year ended December 31, 2007 were $352.3 million, an increase of $94.3 million, or 37%, compared with last year's total revenues of $258.0 million. The majority of the rise is attributable to volume related transaction fees, which increased $84.6 million, accounting for 90% of the revenue gain.

        Transaction fees rose 45% to $270.9 million for the 2007 fiscal year, representing 76.9% of total revenues, compared with $186.3 million for the prior year period, or 72.2% of total revenues. This increase was fueled by robust trading volume. CBOE's average daily volume of options contracts traded was 3.76 million contracts for the year ended December 31, 2007, a 40% increase compared with last year's comparable average of 2.68 million contracts. Additionally, the transaction fee per contract increased 4% to $0.287 for the year from $0.276 for the 2006 fiscal year, contributing to the growth in transaction fees. This increase reflects targeted fee changes implemented in 2007 combined with a shift in the volume mix favoring higher-margin product categories.

        Other member fees increased 19% to $26.5 million for the year ended December 31, 2007 from $22.3 million in the comparable period last year, representing 7.5% and 8.6% of total revenues for 2007 and 2006, respectively. Other member fees primarily represent member dues, member user fees and systems services which are mostly fixed and are not directly influenced by trading volume. For the 2007 fiscal year, higher fees generated from systems services more than offset lower fees associated with membership dues and trading floor charges. The increase in systems services revenue was primarily driven by a new fee that was implemented in 2007, which is assessed based on quote volume. In addition, revenue from trade match reports increased due to higher demand for that service, which is correlated to trading volume. The decline in membership dues and trading floor charges is primarily due to: (1) a drop in the number of members, with fewer exercise right holders trading at CBOE, (2) changes in CBOE's member fee structure and (3) the shift in members accessing our trading environment remotely rather than through open outcry on our trading floor. With the number of members on the floor going down, revenue from user-based fees such as trading floor booths and telecommunications services provided by CBOE have declined as well.

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        OPRA income declined 5% to $18.9 million for the year ended December 31, 2007 from $20.0 million in the comparable period last year. As a percent of total revenue this category accounted for 5.3% of total revenues for the 2007 fiscal year compared with 7.7% in the same period last year. OPRA income, or market data fees, is allocated through OPRA based on each exchange's share of total options transactions cleared. CBOE's share of total options transactions cleared declined in the second half of 2007, dropping about 2 percentage points for the full year compared with 2006, accounting for the decline in OPRA income. The decline in CBOE's income allocation percentage was offset to some degree by a 2% rise in the net distributable revenue for OPRA in the year ended December 31, 2007 compared with the year ended December 31, 2006.

        Regulatory fees rose 4% to $14.3 million for the year ended December 31, 2007 compared with $13.8 million for the same period in 2006. As a percent of total revenue this category accounted for 4.1% of total revenues for the year ended December 31, 2007 compared with 5.4% in the prior year period. Higher registered representative fees associated with the hiring of account executives by member firms accounted for the growth in regulatory fees in 2007.

        Investment income was $8.0 million (2.3% of total revenues) for the 2007 fiscal year, a 69% increase compared with $4.7 million (1.9% of total revenues) for the 2006 fiscal year. The increase in investment income is attributable to higher invested cash due to the increase in excess cash available as a result of CBOE's improved financial performance. In addition, investment income benefited from a modest improvement in yields.

        Revenue from other sources totaled $13.6 million (3.9% of total revenues for the period) for the year ended December 31, 2007 compared with $10.9 million (4.2% of total revenues for the period) for the comparable period in 2006. The most significant factors contributing to the growth in other revenue were: order routing cancel fees, which increased $1.9 million in 2007 and are correlated to overall volume growth; fees from CBOE's Market Data Express, which provides historical market data, contributed incremental income of $0.5 million; business conduct fines, which grew by $1.5 million and revenue generated from ads on CBOE's website, which was up by $0.4 million in 2007 compared with 2006. Offsetting these favorable variances somewhat was a $2.2 million revenue decrease in license fee assessments related to a member firm fee cap program that was modified in 2007. In 2007, CBOE implemented new transaction fee surcharges on certain licensed products, and at the same time, reduced the license fee assessment to mitigate charges to those firms that exceeded the trading cap.

Expenses

        Total operating expenses were $212.4 million for the year ended December 31, 2007 compared with $186.0 million in the year ended December 31, 2006. Operating expenses as a percent of total revenues decreased to 60.3% in 2007 from 72.1% in 2006 thereby increasing the operating margin to 39.7% for the year ended December 31, 2007 from 27.9% in the year ended December 31, 2006. The higher operating margin was primarily due to significant increases in average daily contract volume and the scalability and operating leverage inherent in CBOE's business model combined with our cost control initiatives.

        For the year ended December 31, 2007, employee costs were $83.5 million or 23.7% of total revenues, representing our largest expense category. For the same period last year, employee costs were

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$79.8 million or 30.9% of total revenues. CBOE had 586 employees at December 31, 2007 compared with 626 at year end 2006, reflecting CBOE's efforts to maintain strong expense controls. The increase in employee costs in 2007 compared with 2006 is primarily attributable to higher employee incentive awards, which are aligned with CBOE's improved financial performance.

        Outside services costs increased to $23.4 million for the 2007 fiscal year compared with $20.5 million in the prior year, representing 6.6% of total revenues and 7.9% of total revenues in 2007 and 2006, respectively. The $2.9 million increase in expenses related to outside services in 2007 compared with 2006 primarily reflects higher legal expenses relating to the exercise right issue and other legal matters, more spending on contract services relating to software development costs and additional costs associated with electrical services.

        Royalty fee expense for the 2007 fiscal year increased to $29.0 million from $23.6 million compared with 2006. This increase is directly related to the growth in the options contract volume of licensed products. Royalty fees decreased to 8.2% of 2007's total revenues from 9.1% in 2006 as the trading volume in licensed products increased at a lower rate relative to non-licensed products in 2007 compared with 2006.

        Depreciation and amortization charges declined by $2.9 million to $25.3 million for the year ended December 31, 2007 compared with 2006. This decrease was attributable to certain assets becoming fully depreciated in 2006 or early 2007 and rolling off the depreciation expense schedule. Most notably, the initial investment in our Hybrid Trading System was fully depreciated in late 2006.

        Trading volume incentives were $5.1 million for the 2007 fiscal year compared with $2.2 million in 2006, an increase of $2.9 million. This increase reflects higher expenses related to a market linkage program for designated primary market makers (DPMs), which reimburses DPMs for the cost of linking customer orders to markets at other exchanges.

        Travel and promotion expense increased to $9.6 million in 2007 from $7.2 million in 2006. The increase was primarily due to higher advertising costs related to new product introductions and promotions. In 2007, CBOE launched a new branding initiative to build awareness and illustrate its leadership position in the options marketplace. As a percent of total revenues, travel and promotion expenses remained even at 2.8% in 2007 and 2006.

        Net loss from investment in affiliates was $0.9 million in the year ended December 31, 2007 compared with $0.8 million in the year ended December 31, 2006, which primarily relates to CBOE's share of operating losses for OneChicago.

        Other expenses totaled $11.5 million in 2007, up from $0.3 million in 2006. The higher expense level is mainly due to the impact of CBOE benefiting from a $7.1 million refund in 2006 associated with the settlement of a class action suit that related to the 2000 fiscal year. Given that all the appeals related to the suit were exhausted in 2006, the refund was taken as a reduction in expense in the 2006 fiscal year. There was no comparable credit or refund recorded in 2007, resulting in a negative variance between the two periods. The expense incurred in 2000 relating to this settlement was $16.0 million and was shown as a separate line item as settlement expense in CBOE's statement of income for the year ended June 30, 2000. For a further discussion, please see "Business—Legal Proceedings" on page 106. In addition, other expenses include a $3.6 million loss incurred from the sale of our investment in HedgeStreet. For a further discussion, please see "Business—Other Business Relationships" on page 102.

        For the year ended December 31, 2007, the provision for income taxes was $56.8 million compared with $29.9 million for the year ended December 31, 2006. This increase is directly related to the increase in income before taxes. The effective tax rate was 40.6% and 41.5% for the year ended December 31, 2007 and December 31, 2006, respectively. The effective tax rate for 2007 was lower than 2006 as net income before taxes increased while the permanent differences and other adjustments

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remained at similar levels, which reduces the impact of permanent tax differences on a percentage basis.

Financial Position at June 30, 2009 and December 31, 2008

        As of June 30, 2009, total assets were $553.1 million, an increase of $57.0 million compared with $496.1 million at December 31, 2008. This increase was primarily due to positive cash flow generated from operations. The following highlights the key factors that contributed to the change in total assets:

        At December 31, 2008, total assets were $496.1 million, an increase of $154.4 million compared with assets of $341.7 million at December 31, 2007. This increase was primarily due to the higher number of contracts traded at CBOE and its corresponding growth in earnings. The following highlights the key factors that contributed to the change in total assets:

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        At June 30, 2009, total liabilities were $119.0 million, an increase of $4.5 million from the December 31, 2008 balance of $114.5 million. This increase primarily resulted from a $20.7 million increase in deferred revenue, a $2.2 million increase in marketing fee payable and a $1.9 million increase in current income taxes payable. The liability for deferred revenue primarily represents access fees paid by temporary members held in an escrow account and prepaid transaction fees. These increases were largely offset by a $19.9 million decrease in accounts payable and accrued expenses.

        At December 31, 2008, total liabilities were $114.5 million, an increase of $39.2 million from December 31, 2007. This increase resulted from higher accounts payable and accrued expenses of $19.7 million and an increase in the deferred revenue of $17.4 million. Deferred revenue primarily represents access fees paid by temporary members which are being held in an escrow account. In addition, non-current income taxes payable increased to $3.1 million for the year ended December 31, 2008.

Liquidity and Capital Resources

        Historically, we have financed our operations and cash needs through income generated from operations. Cash requirements principally consist of funding capital expenditures and working capital. At June 30, 2009, cash and cash equivalents totaled $339.9 million. At December 31, 2008, we had $281.4 million in cash and cash equivalents. We anticipate that current cash balances and future funds generated through operations will be sufficient to meet cash requirements for operations currently and in the long term. If the cash flows from operations are significantly affected due to increased competition, we currently have a variety of capital options for satisfying short-term cash needs, such as reducing cash and cash equivalents to provide needed funds or borrowing against our credit facility, which will be available following the resolution of the Settlement Agreement. As part of the Settlement

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Agreement, CBOE will pay qualifying class members $300 million in cash upon the completion of the restructuring transaction. To ensure that the Company has adequate funds available, CBOE secured a $150 million revolving credit facility in December of 2008. The extension of credit under this facility is contingent upon the final, non-appealable resolution of the Settlement Agreement. However, upon compliance, the funds can be used for general corporate purposes and are not limited to funding the Settlement Agreement. Although CBOE does not anticipate that it will need to draw down the full amount of the facility to meet its obligation under the Settlement Agreement, the facility provides CBOE flexibility in accessing available sources of funds. Based on its financial position as of June 30, 2009, CBOE estimates that it will borrow approximately $30.0 million against its line of credit to help fund the cash payment required under the Settlement Agreement. As of June 30, 2009 and December 31, 2008, the CBOE had no debt.

        Net cash provided by operating activities was $78.4 million in the first six months of 2009 compared with $83.3 million in the same period of 2008. Net cash provided by operating activities primarily consists of net income adjusted for certain non-cash items including depreciation and amortization and the effects of changes in working capital. For the first six months of 2009, net cash provided from operating activities was $26.0 million higher than net income. Adjustments primarily included $13.8 million in depreciation and amortization, a $9.3 million decrease in income taxes receivable, a $3.3 million increase in current and long-term income taxes payable and a $20.7 million increase in deferred revenue, which resulted primarily from higher deferred revenue from the prepayment of transaction fees and from monthly access fees for certain CBOE members whose membership had been temporarily extended pending the resolution of the exercise right issue. Offsetting these positive adjustments somewhat was a $16.6 million reduction in accounts payable and accrued expenses.

        Net cash provided by operating activities was $164.9 million, $115.2 million and $69.4 million for 2008, 2007 and 2006, respectively. Changes in net cash provided by operating activities are primarily attributable to increases in our net income between periods, and to a lesser degree, due to fluctuations in working capital. In 2008, net cash provided by operating activities was $49.7 million higher than net income. Adjustments primarily consisted of $25.6 million in depreciation and amortization, a $14.2 million increase in current amounts due for accounts payable and accrued expenses and a $17.4 million increase in deferred revenue, partially offset by a $7.0 million decrease in net income taxes payable, which includes the net impact of an increase in income taxes receivable and a decrease in income taxes payable. Deferred revenue reflects the prepayment of transaction fees and the assessment of a monthly access fee for certain CBOE members whose membership had been temporarily extended pending the resolution of the exercise right issue. These monthly fees are being deferred and placed in an interest-bearing escrow account pending the final approval of the exercise right litigation. In 2007, net cash provided by operating activities exceeded net income by $32.0 million primarily due to depreciation and amortization of $25.3 million, a $3.6 million loss recognized on the sale of our investment in HedgeStreet and a $4.8 million increase in deferred revenue. The increase in deferred revenue largely resulted from the establishment of a monthly access fee for certain CBOE members whose membership had been temporarily extended pending the resolution of the exercise right issue. In 2006, net cash provided by operations was $27.2 million higher than net income, reflecting depreciation and amortization of $28.2 million and increases in accounts payable and accrued expenses, offset somewhat by an increase in accounts receivable and a decrease in the provision for deferred income taxes.

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        Net cash used in investing activities was $19.8 million and $25.1 million for the six months ended June 30, 2009 and 2008, respectively. These amounts primarily related to expenditures for capital and other assets and the increase in restricted funds in the six months ended June 30, 2008. Expenditures for capital and other assets totaled $20.8 million and $16.4 million for the first six months of 2009 and 2008, respectively. These amounts primarily represent purchases of systems hardware and software. The $0.5 million increase in restricted funds for the six months ended June 30, 2009 represents amounts for temporary member access fees that qualify for the fee-based payments to be made to certain class members under the Settlement Agreement. For the first six months of 2008, restricted funds increased $10.3 million due to the increase in temporary member assess fees deferred and held in restricted cash. CBOE also recorded an increase of $1.5 million for the sale of NSX stock.

        For the years ended December 31, 2008, 2007 and 2006 net cash used in investing activities was $64.1 million, $16.2 million and $51.8 million, respectively. These amounts primarily related to expenditures for capital and other assets in each of the respective periods and the increase in restricted funds in 2008 and 2007. Expenditures for capital and other assets totaled $43.8 million, $32.1 million and $28.7 million for 2008, 2007 and 2006, respectively. These expenditures primarily represent purchases of systems hardware and software. For the year ended December 31, 2008, the $21.9 million used in investing activities related to the increase in restricted funds to $26.2 million from $4.2 million at the end of 2007. In 2007, CBOE sold $20.0 million in investments available for sale for cash which represents the maturity of Treasury Bills. In 2006, the CBOE invested $19.5 million in Treasury Bills which was reflected as investments available for sale.

        Capital expenditures totaled $20.8 million and $16.4 million for the six months ended June 30, 2009 and 2008, respectively, and $43.8 million, $32.1 million and $28.7 million for the 2008, 2007 and 2006 fiscal years, respectively. The majority of all of these capital expenditures were for the enhancement or the expansion of the CBOE trading technology and applications. CBOE continually invests in technology to support its trading platform to ensure that its systems are robust and have the capacity to handle the volume growth being witnessed in the options industry. In addition to capacity needs, our systems are constantly being modified to handle more complex trading strategies and sophisticated algorithms at the fastest possible response time. The higher level of spending in 2008 also was attributable to the development of initial systems requirements for C2, which is expected to launch in late 2009 or early 2010. The capital investment for C2 is expected to be approximately $25.0 million, with the majority of the systems development and corresponding capital outlay occurring in 2008.

        At June 30, 2009, construction in progress totaled $20.6 million, up $1.2 million from year end 2008. At December 31, 2008, construction in progress totaled $19.4 million, up $19.0 million compared with December 31, 2007. This increase primarily resulted from the work in progress to develop C2.

        Net cash used in financing activities totaled $0.1 million for the six months ended June 30, 2009. There were no net cash uses or sources from financing activities for the six months ended June 30, 2008. The 2009 amount primarily represents the payment of legal fees incurred in securing CBOE's line of credit.

        For the year ended December 31, 2008, net cash used in financing activities totaled $0.8 million, which represents the amortization of loan origination fees and the payment of quarterly commitment fees related to CBOE's line of credit. Net cash used in financing activities totaled $0.1 million for the years ended December 31, 2007 and 2006, reflecting the purchase of exercise right privileges from full members of the CBOT.

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Lease and Contractual Obligations

        The CBOE leases office space in Illinois for its Regulatory Division and a suburban disaster recovery center, in New York for certain marketing activities and in the New York City metropolitan area for C2 with lease terms remaining from 12 months to 50 months as of June 30, 2009. In addition, CBOE has contractual obligations related to certain advertising programs and licensing agreements with various licensors. The licensing agreements contain annual minimum fee requirements which total $14.9 million for the next five years and $3.4 million for the five years thereafter. Total rent expense related to these lease obligations for the six months ended June 30, 2009 and 2008 were $1.6 million and $0.8 million, respectively. Future minimum payments under these non-cancelable lease and advertising agreements were as follows at June 30, 2009 (in thousands):


 
  Total
  Less than 1 year
  1-3 years
  3-5 years
 

Operating leases   $ 8,674   $ 3,189   $ 3,680   $ 1,805  

Contractual obligations     4,534     1,712     2,822      

Total   $ 13,208   $ 4,901   $ 6,502   $ 1,805  

Legal Issues

        In September 2000, the CBOE reached an agreement in principle to settle a consolidated civil class action lawsuit filed against the CBOE and other U.S. options exchanges and certain market maker firms. The CBOE agreed to pay $16.0 million, which was paid in full and held in escrow pending approval of the settlement agreement by the U.S. District Court for the Southern District of New York. In October 2005, the CBOE and other settling parties reached a revised settlement that resolved certain disputes concerning the interpretation of certain provisions of the original settlement agreement. As a result of the revised settlement, the CBOE's settlement amount was reduced to $9.3 million. In February 2006, the U.S. District Court preliminarily approved the revised settlement, and the CBOE received a refund on its original settlement amount of $7.1 million, including accrued interest. The district court granted final approval to the settlement, and entered final judgment in the case, in December 2006. The deadline to appeal the settlement has passed. No appeals were filed; therefore, this settlement is now final and binding. For a further discussion, please see "Business—Legal Proceedings" on page 106.

        The CBOE is currently a party to various legal proceedings. Litigation is subject to many uncertainties, and the outcome of individual litigated matters is not predictable with assurance. For a description of current CBOE litigation please see "Business—Legal Proceedings" on page 106.

Critical Accounting Policies

        The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts in the financial statements. Actual amounts could differ from those estimates. CBOE believes the following represent those critical accounting policies where materially different amounts could be reported under different conditions or using different assumptions.

        Transaction fees revenue is considered earned upon the execution of the trade and is recognized on a trade date basis. In the event members pay for services in a lump-sum payment, revenue is recognized as services are provided. Other member fees revenue is recognized during the period the service is provided. The OPRA income is allocated based upon the share of total options transactions cleared for each of the OPRA members and is received quarterly. Estimates of OPRA's quarterly revenue are made and accrued each month. Regulatory fees are primarily assessed based upon

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customer contracts cleared by member firms and are recognized during the period the service is rendered.

        Long-lived assets to be held and used are reviewed to determine whether any events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The CBOE bases the evaluation on such impairment indicators as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements, as well as other external market conditions or factors that may be present. If such impairment indicators are present that would indicate that the carrying amount of the asset may not be recoverable, the CBOE determines whether an impairment has occurred through the use of an undiscounted cash flow analysis of assets at the lowest level for which identifiable cash flows exist. In the event of impairment, the CBOE recognizes a loss for the difference between the carrying amount and the estimated value of the asset as measured using quoted market prices or, in the absence of quoted market prices, a discounted cash flow analysis.

        Investments in affiliates represent investments in OCC, OneChicago, LLC (OneChicago), The National Stock Exchange (NSX), HedgeStreet, Inc. and CBOE Stock Exchange, LLC (CBSX). The investment in OCC (20% of its outstanding stock) is carried at cost because of the CBOE's inability to exercise significant influence.

        From the inception of the CBOE's investment in NSX until July 1, 2006, we accounted for our investment under the equity method of accounting. Even though the CBOE owned as much as 68% of the total outstanding certificates of proprietary membership of NSX (formerly the Cincinnati Stock Exchange), our ownership only provided the CBOE with one vote on any issues put before the membership. In addition, the number of CBOE appointed members on the NSX board of directors always represented a minority (six of thirteen) of the NSX board. For these reasons, it was determined that because the CBOE lacked effective control over the operating and financing activities of NSX, our investment should be accounted for under the equity method of accounting. In 2004 (see note 2 in the financial statements located in Annex A), the CBOE began selling its certificates of proprietary membership back to NSX. When the agreement to sell the certificates back to NSX was executed, the CBOE adjusted its value of its investment in NSX to reflect the present value of the expected proceeds. The sale will be concluded over time, subject to certain NSX working capital requirements. Beginning July 1, 2006, the CBOE accounts for the investment in NSX ($3.7 million representing 8,424 shares or 4.98% of the total Class A voting stock and 39,312 or 100% of the Class B non-voting stock as of December 31, 2007 and 2006) under the cost method of accounting due to the reduced percentage in our ownership of NSX and continued lack of control over the activities of NSX. On January 28, 2008, CBOE exercised a put pursuant to the TORA and sold 19,656 shares of Class B stock, resulting in a payment to CBOE of $1.5 million. CBOE's investment in NSX was reduced to $2.2 million which consisted of 8,424 Class A voting shares and 19,656 Class B non-voting shares. On March 18, 2009, CBOE exercised its last put right under the TORA with NSX. CBOE surrendered 19,656 shares of Class B common stock resulting in a payment to CBOE of $1.5 million. CBOE no longer owns any Class B common shares, but continues to own 8,424 Class A common shares in NSX Holdings. CBOE no longer has a representative on the NSX board. At June 30, 2009, CBOE's investment in NSX was $0.7 million.

        The CBOE's investment in OneChicago (23.7% of its outstanding stock) is accounted for under the equity method of accounting due to the lack of effective control over the operating and financing activities of OneChicago. On March 15, 2006, Interactive Brokers Group, LLC ("IBG") made an investment for a 40% interest in OneChicago, resulting in a $4.3 million increase in CBOE's investment in OneChicago. This amount is reflected net of deferred taxes as additional paid-in capital of

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$2.6 million ($4.3 million net of $1.7 million in deferred taxes) on the 2006 consolidated statements of members' equity. The CBOE contributed $1.2 million in capital to OneChicago during the year ended December 31, 2006 and made no capital contributions during the six months ended June 30, 2009 and 2008 or the 2008 and 2007 fiscal years. At June 30, 2009, CBOE's investment in OneChicago was $2.7 million.

        In addition, in 2006, the CBOE invested $3.8 million in HedgeStreet, Inc. This capital contribution represented 17.6% of the total stock outstanding and was also accounted for under the cost method. In 2007, HedgeStreet completed a merger transaction resulting in the transfer of all company assets and operations to IG Group. As a result, CBOE recognized a loss of $3.6 million on the sale in 2007 and received a cash payment of $0.2 million. A potential maximum second payment of $0.1 million was held in escrow for a period of one year to address any additional HedgeStreet claims. CBOE II received the final payment of $0.1 million in February 2009.

        In 2007, CBOE received a 50 percent share in CBSX in return for non-cash property contributions, which included a license to use the CBOEdirect trading engine during the term of the company in addition to other license rights. CBOE accounts for the investment in CBSX under the equity method due to the lack of effective control over operating and financing activities.

        Investments in affiliates are reviewed to determine whether any events or changes in circumstances indicate that the investments may be other than temporarily impaired. In the event of impairment, the CBOE would recognize a loss for the difference between the carrying amount and the estimated fair value of the equity method investment.

        CBOE accounts for software development costs under AICPA Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," and other related guidance. CBOE expenses software development costs as incurred during the preliminary project stage, while capitalizing costs incurred during the application development stage, which includes design, coding, installation and testing activities.

Market Risk

        CBOE provides markets for trading securities options. However, CBOE does not trade options for its own account. CBOE invests available cash in highly liquid, short-term investments, such as money market funds or investment grade paper. Our investment policy is to preserve capital and liquidity. CBOE does not believe there is significant risk associated with these short-term investments. CBOE has no long-term or short-term debt.

Recent Accounting Pronouncements

        In June 2009, the FASB issued SFAS No. 168, FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162. The codification will become the source of authoritative U.S. generally accepted accounting principles recognized by the FASB to be applied to nongovernmental entities. SFAS No. 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of SFAS No. 168 is not expected to have an impact on CBOE's financial position or results of operations.

        In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46R—Consolidation of Variable Interest Entities, alters how a company determines when an entity that is insufficiently capitalized or not controlled through voting should be consolidated. A company has to determine whether it should provide consolidated reporting of an entity based upon the entity's

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purpose and design and the parent company's ability to direct the entity's actions. SFAS No. 167 is effective for a company's first fiscal year beginning after November 15, 2009 or January 1, 2010 for companies reporting on a calendar-year basis. The adoption of SFAS No. 167 is not expected to have an impact on CBOE's financial position or results of operations.

        In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140, requiring entities to provide more information about sales of securitized financial assets and similar transactions, particularly if the seller retains some risk. The statement eliminates the concept of a qualifying special-purpose entity, changing the requirements for de-recognition of financial assets and calls upon sellers of assets to make additional disclosures. SFAS No. 166 is effective for a company's first fiscal year beginning after November 15, 2009 or January 1, 2010 for companies reporting on a calendar-year basis. The adoption of SFAS No. 166 is not expected to have an impact on CBOE's financial position or results of operations.

        In May 2009, the FASB issued SFAS No. 165, Subsequent Events establishing standards of accounting and reporting for transactions and events occurring after the balance sheet date. SFAS No. 165 addresses two types of subsequent events: recognized and non-recognized. Recognized subsequent events are defined as comprising events or transactions providing additional evidence about conditions that existed at the balance sheet date, including estimates inherent in the financial statement preparation process. Non-recognized events are defined as comprising events that provide evidence about conditions not existing at the balance sheet date but, rather, arose after such date. Recognition in the financial statements is required for the effect of subsequent events providing additional evidence about conditions that existed at the balance sheet which may include: (1) events giving rise to litigation that had been initiated before the balance sheet date but was settled after such date at an amount different from the recorded amount, and (2) events affecting the realization of assets or the settlement of liabilities when such events represent the culmination of conditions that existed over a relatively long period. SFAS No. 165 is effective for interim and annual periods ending after June 15, 2009. CBOE has adopted SFAS No. 165 and will determine the impact on CBOE's financial position or results of operations as events occur.

        In April 2009, the FASB issued FSP No. 141(R)-1, Accounting for Assets Acquired and Liabilities assumed in a Business Combination That Arise from Contingencies, amending and clarifying FASB No. 141 to address application issues related to initial recognition and measurement, subsequent measurement and accounting and disclosure of assets and liabilities arising from contingencies in a business combination. FSP No. 141(R)-1 is effective for assets or liabilities arising from contingencies in business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The adoption of SFAS No. 141(R)-1 had no impact on CBOE's financial position or results of operations.

        In December 2007, the FASB issued Statement No. 141R (revising FASB No. 141), Business Combinations. SFAS No. 141R changed the accounting for business combinations in a number of areas including the treatment of contingent consideration, contingencies, acquisition costs, in-process research and development costs and restructuring cost. In addition, under SFAS No. 141R, changes in deferred tax asset valuation allowances and acquired income tax uncertainties in a business combination after the measurement period will impact income tax expense. SFAS No. 141R is effective for fiscal years beginning after December 15, 2008. The adoption of SFAS No. 141R did not have a significant impact on CBOE's financial position or results of operations.

        In December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements, which amends Accounting Research Bulletin No. 51, Consolidated Financial Statements, to establish new standards that will govern the accounting for and reporting of noncontrolling interests in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Also, SFAS No. 160 requires that: (1) non-controlling interest, previously referred to as

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minority interest, be reported as part of equity in the consolidated financial statements; (2) losses be allocated to the non-controlling interest even when such allocation might result in a deficit balance, reducing the losses attributed to the controlling interest; (3) changes in ownership interests be treated as equity transactions if control is maintained; and, (4) upon a loss of control, any gain or loss on the interest sold be recognized in earnings. SFAS No. 160 is effective on a prospective basis for all fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008, except for the presentation and disclosure requirements, which will be applied retrospectively. The adoption of SFAS No. 160 had no impact on CBOE's financial position or results of operations.

Quarterly Comparisons

        In the securities industry, quarterly revenue fluctuations are common and are due primarily to seasonal variations in trading volumes, competition and technological and regulatory changes. Typically, revenues are lowest in the third quarter, primarily in August, due to reduced trading activity during the summer months.

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BUSINESS

Overview

        Founded in 1973, the CBOE was the first organized marketplace for the trading of standardized, listed options on equity securities. Since its inception, the CBOE has grown to become one of the world's leading exchanges for the trading of derivatives and is recognized globally for its leadership role in the trading of options on individual equities, exchange-traded funds and cash-settled equity indexes. Currently, the CBOE operates as a member-owned, non-stock Delaware corporation. As of June 30, 2009, we employed 596 individuals.

        The following chart shows our trading volume by quarter for the period January 2001 through June 2009.

GRAPHIC

        Our volume of contracts traded in 2008 was approximately 1.2 billion contracts, representing an increase of 26% over our volume in 2007, for a daily average of 4.7 million contracts. In 2007, our volume of contracts traded was approximately 944 million contracts, with an average of approximately 3.8 million contracts per day, representing an increase of 40% over 2006. In 2006, our volume of contracts traded was approximately 675 million contracts for an average of nearly 2.7 million contracts per day. In 2008, 2007 and 2006, trades at the CBOE represented 33.3%, 33.0% and 33.3%, respectively, of the total contracts traded on all U.S. options markets. For the twelve months ended December 31, 2008 and 2007, we generated revenue of approximately $424 million and $352 million, respectively. We generate revenue primarily from the following sources:

        The CBOE is a self-regulatory organization (SRO), which is regulated by the SEC. As an SRO, the CBOE plays a critical role in the U.S. securities markets: the CBOE conducts market surveillance and examines members and member organizations for, and enforces compliance with, federal securities

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laws and the CBOE Rules. Since March 26, 2004, the CBOE has also operated the CBOE Futures Exchange, LLC, or CFE, a wholly-owned subsidiary of the CBOE, which is a designated contract market under the oversight of the CFTC. On July 27, 2006, the CBOE announced the creation of the CBOE Stock Exchange, LLC, a facility of the CBOE in which the CBOE holds a 50% interest, which began trading stocks in March 2007.

        The CBOE was created by the CBOT in 1973 as a result of the CBOT's efforts to develop new products. Prior to that time, there was no organized, regulated marketplace for the trading of options on equities. Rather, there was a community of "put and call dealers" that conducted the trading of non-standardized options on an "over-the-counter" basis. When it became clear that options on equities would fall under the regulatory jurisdiction of the SEC, the CBOT decided to create a separate SRO for their trading. The CBOT ultimately spun this entity off as a separate, independent organization, while providing an Exercise Right pursuant to which full members of the CBOT would have the right to become members with trading rights on the CBOE.

        The original products, call options on the common stock of 16 major U.S. corporations listed on the NYSE, began trading on April 26, 1973 through an open outcry, floor-based trading system. Trading in these call options grew quickly. Additional options markets were soon created by existing stock exchanges, including the American Stock Exchange, or the AMEX (now known as NYSE Amex, LLC), the Midwest Stock Exchange, or the CHX (now known as the Chicago Stock Exchange), the Pacific Exchange, or the PCX (now known as NYSE Arca, Inc.), and the Philadelphia Stock Exchange, or the PHLX (now known as Nasdaq OMX PHLX, Inc.).

        Put options were introduced in 1977, and by the end of the year, annual volume reached 25 million contracts. That same year, the SEC imposed a moratorium on further expansion of the options markets, pending an in-depth review of the regulatory structure and procedures.

        The moratorium ended on March 26, 1980, and the CBOE responded by increasing the number of stocks on which it traded options from 59 to 120. That same year, the options business of the CHX was consolidated into the CBOE.

        On March 11, 1983, ten years after it created the first options marketplace, the CBOE introduced the first options based on a stock index—the CBOE 100 (also known by its symbols, OEX and XEO). Subsequently, the CBOE entered into an agreement with Standard & Poor's in which the CBOE 100 became the S&P 100 and CBOE acquired the rights to trade options based on the S&P 500 Index. On July 1, 1983, options were introduced on the S&P 500 Index, which has grown to be the CBOE's largest single product and the most actively traded index option in the U.S. Since 1983, index option trading has expanded to cover many other broad-based indexes and myriad other indexes covering market segments, industry sectors and trading styles.

        Option volume continued to grow, and in 1984, the CBOE volume exceeded 100 million contracts. With the continuing growth in options trading, the CBOE outgrew its leased space in the CBOT building and decided to build its own facilities. In 1984, the CBOE moved into a 350,000 square foot trading facility, which we continue to occupy. That same year, the rapid growth in index options trading prompted the CBOE to introduce the first automated execution system for options. Shortly thereafter, in April 1985, the exchange established The Options Institute as an industry resource for the education of options users, including account executives, institutional money managers, pension fund sponsors and individual investors.

        The CBOE continues to play a leading role in options product innovation. In 1990, we introduced Long-term Equity AnticiPation Securities, or LEAPS. LEAPS are long-term option contracts that allow investors to establish positions that can be maintained for a period of up to three years for equity

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options and five years for index options. The development and introduction of LEAPS by the CBOE in 1990 added a new range of options possibilities. In 1993, the CBOE introduced FLEX options, which allow investors to customize certain terms on options contracts. In that same year, the CBOE unveiled "VIX," a proprietary market volatility index that gauges investor sentiment. VIX has since become widely known as the market "fear gauge."

        In 1997, the CBOE acquired the options business of the New York Stock Exchange (NYSE) and relocated it to the CBOE. That same year the CBOE was selected by Dow Jones & Co. to introduce the first options on the Dow Jones Industrial Average (DJIA).

        In 1999, the CBOE modified the structure of its market making system to expand use of Designated Primary Market Makers, or DPMs, to all equity options. This modification assured that a specialist would be available to oversee trading and provide customer service to member firms in every equity option class. Shortly thereafter, the CBOE multiply listed additional options classes that had previously been traded only on a single exchange.

        In 2000, a number of changes took place, including the opening for business of a newly created screen-based options exchange, the International Securities Exchange, or the ISE, and the SEC's adoption of a plan to link the options exchanges so as to reduce the potential that a trade would occur at a price inferior to a better bid or offer in another marketplace. After a relatively slow start, the new screen-based ISE eventually was able to generate volume and capture market share from the existing exchanges. Following a decline in volume and market share from the 2000—2002 period, we introduced several innovations to our own market model, and our trading volume began to grow at a rapid pace.

        In 2004, competition increased further as a second all-electronic competitor, the Boston Options Exchange, or the BOX, was launched. In 2006, the NYSE reentered the options market by merging with Archipelago Holdings, Inc. (Arca), which had previously acquired the PCX.

        In early 2008, Nasdaq acquired the PHLX and commenced operation of a seventh options exchange, the Nasdaq Options Market (NOM). In addition, the NYSE, now known as NYSE Euronext, acquired the AMEX, giving it two options exchanges on which to conduct business.

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        The increased competition among exchanges combined with business model and product innovations have all contributed to the continued growth in industry and company trading volumes. The chart below shows the CBOE total annual volume for the period 1995 through 2008.

GRAPHIC

        An essential part of the CBOE's history has been its role as an innovator in trading systems since the beginning of the CBOE. During the 1980's, the CBOE introduced a variety of technological innovations, including an Electronic Customer Order Book and a Retail Automated Execution System, both of which increased the efficiency of options trading. In 2001, the CBOE completed the development of CBOEdirect, a fully integrated screen-based trading system. In 2003, CBOEdirect formed the basis for the CBOE's new market model, the Hybrid Trading System, which married the screen-based trading capabilities of CBOEdirect with the floor-trading environment. Hybrid serves as the trading platform for most of the CBOE's products today and has been expanded to allow for remote market making, automated complex order processing and enhanced institutional order handling capability.

The Global Derivatives Industry

        Our primary business, providing a marketplace for the execution of transactions in exchange-traded options, is part of the large and growing global derivatives industry. Derivatives are financial contracts that derive their value from some other underlying asset or reference value. These underlying assets and reference values include individual stocks, stock indexes, debt instruments, interest rates, currencies and commodities. In recent years derivatives have also been developed on economic indicators and "artificial" assets such as pollution rights. The global derivatives industry includes both exchange traded products and a large over-the-counter market. The most common types of derivatives are options, futures and swap contracts. These products allow for various types of risk to be isolated and transferred. They can be used for hedging, income generation, speculation and leveraged position taking.

        Over the past 10-15 years, the use of financial derivatives has expanded dramatically and evolved into a key tool with which money managers and investors attempt to transfer risk and achieve higher risk-adjusted returns. As a result, exchange-traded derivatives have experienced strong growth, and in

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2008, the notional turnover exceeded $2,200 trillion. According to data from the Bank for International Settlement, or BIS, the notional value outstanding of off-exchange equity-linked derivatives as of December 2008 was approximately $6.5 trillion, as compared to open interest on exchanges of approximately $5.1 trillion.

        Exchange-traded options are derivative securities products that provide the means for hedging, speculation and income generation. The vast majority of derivatives traded on U.S. securities exchanges are options on individual stocks, exchange-traded funds and stock indexes. An option is a contract with standardized terms giving the buyer the right, but not the obligation, to buy or sell a specified quantity of an underlying security or index at a specific price for a specific period of time.

        Stock option contracts are generally for 100 shares of underlying stock. In the case of an equity call option, the buyer purchases the right to buy 100 shares of the underlying stock at the strike price on or before the expiration date. The seller of the call option is obligated to sell 100 shares of the underlying stock at the strike price if the buyer exercises the option. An investor generally buys a call option with the expectation that the stock's price will increase, and the stock purchased at the lower strike price will have a higher market value. A call might also be used as a hedge against a short stock position. The writer of a call option may expect the price to stay below the strike price or may use calls as a way of selling the asset if a certain price point is reached.

        In the case of an equity put option, the buyer purchases the right to sell 100 shares of the underlying stock at the strike price on or before the expiration date. The seller of a put option is obligated to buy 100 shares of the underlying stock at the strike price if the buyer exercises the option. An investor buys a put option with the expectation that the stock's price will decrease, and the stock will be sold at a value higher than might be obtained in the equity markets. The writer of a put option expects the price to stay above the strike price. Put options can be thought of as a form of insurance on the value of the investment.

        The price of an option is referred to as the "premium." The buyer of a call or a put pays the premium to the seller for the contract. Regardless of the performance of the underlying asset, the buyer's maximum exposure is the premium paid. The seller of a call, on the other hand, has open-ended exposure with respect to the increase in the value of the underlying asset; the seller of a put has the risk that the asset can become worthless. In return for the premium received, the seller of the option has assumed the risk associated with the change in the value of the underlying asset beyond the strike price. If the buyer exercises a call option on a stock, the seller may be assigned and, if so, is obligated to deliver the stock at the strike price, regardless of the cost of acquiring it. If a buyer exercises a put option on a stock, the seller, if assigned, is required to purchase the stock for the strike price, regardless of its current market value.

        The market for exchange-traded options has increased dramatically since their introduction by the CBOE in 1973. In 1974, the first full year of trading, the average daily volume on the CBOE was 22,462 contracts. By 1981, annual volume on all options exchanges exceeded 100 million contracts, representing average daily volume of over 430,000 contracts. In 1983, ten years after its start, the CBOE alone traded over 82 million contracts for an average daily volume of 325,963. By 1993, the CBOE volume had grown to over 140 million contracts with index options alone trading in excess of 80 million contracts. The continued growth in options trading can be attributed to a variety of factors including increased familiarity with options among retail investors; increased use of options by institutions and industry professionals; increased use of technology, including the increased use of computer-driven trading strategies; the use of options by hedge funds; the continued introduction of new products; and intense competition among options exchanges leading to a narrowing of bid/ask

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spreads and the lowering of transaction fees. The chart below shows total contract trading volume for the U.S. options industry from its inception in 1973 through 2008.

GRAPHIC

        Industry volume for 2008 was nearly 3.6 billion contracts. During the period 2003 to 2008, exchange-traded options volume expanded at a compound annual rate of over 31%, outpacing that of stock and futures markets. Industry volume for 2008 was nearly 3.6 billion contracts. However, the options industry has not gone untouched by the financial crisis that unfolded in the fall of 2008. Most participants in the options markets, including major investment banks, hedge funds and institutional and retail investors, suffered reductions in their asset and capital bases and generally modified their trading activity. As a result, during the first six months of 2009, the growth in options trading has not kept pace with the historical trend. Options industry volume for the first six months of 2009 was approximately 1.8 billion contracts, an increase of 5% over the same period in 2008. CBOE's year-to-date volume through June 2009 average 4.6 million contracts per day, up 3% from the same period in 2008. The different growth rate reflects a 0.07 percentage point decline in CBOE's 2009 market share compared to the same period in 2008.

        We believe that the number of investors that use options represents a growing proportion of the total investing public and that the growth in the use of options represents a long-term trend that will continue in the future. In particular, we believe significant opportunities exist to expand the use of options by both institutional and professional investors and for the migration of activity from the over-the-counter market to exchanges.

        Trading in options products on U.S. options exchanges traditionally has occurred primarily on physical trading floors in areas called "pits" and through an auction process known as "open outcry," which is conducted face-to-face. Only members have access to the trading floor. Individuals and firms have historically become members by owning or leasing a seat. The member traders have direct access to the trading floor and may stand in the pit and make bids and offers to one another. Orders are sent to these members on the trading floor, usually through a broker. This trading is conducted subject to rules that are designed to promote fair and orderly markets. Traders have certain obligations with respect to providing bids and offers, and they receive certain privileges in exchange.

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        The presence of dedicated liquidity providers, including both specialists and market makers, is a key distinguishing feature of the options markets. Presently, there are available in the listed options market options contracts covering approximately 3,000 underlying stocks, ETFs or indexes. Specialists and market makers are employed to provide continuous bids and offers for most listed option series. In return for these commitments, specialists and market makers receive margin exemptions as well as other incentives such as participation rights, fee incentives, or preferred access to certain exchange systems.

        More recently, electronic access has allowed members to provide electronic bids and offers without being physically present on the trading floor. Over the last several years, all of the U.S. options exchanges, either exclusively or in combination with open outcry trading, have begun to provide electronic trading platforms that allow members to submit bids, offers and orders directly into the exchange's trading system. As a result, many liquidity providers now operate remotely, away from the physical trading floors, and the majority of options trading volume is executed electronically. In addition, many exchanges also have rules that allow, under certain circumstances, for large transactions to be negotiated away from the trading floor and brought to the floor for execution or effected on electronic platforms.

        In 2007, there were two notable changes to options market structure. One was the expansion of "portfolio margining" to customer groups. Previously available only to market professionals, portfolio margining will significantly reduce margin requirements by examining the combined risk of a portfolio of financial instruments instead of margining each instrument separately. Portfolio margining has made trading more efficient by freeing up margin capital for other purposes.

        The second notable change is the introduction of penny pricing in the options markets. The listed options markets previously quoted options in either nickel or dime increments, unlike stocks, which trade in penny increments. Effective February 2007, options on 13 different stocks and ETFs started trading in penny increments as part of an industry wide pilot program. Twenty-two additional option classes were added to the Penny Pilot on September 28, 2007, and another 28 classes were added on March 28, 2008. CBOE believes that the Penny Pilot, while narrowing spreads, is causing other unintended consequences for the options industry, in particular, a loss of liquidity in some classes. The SEC is studying the results of the Penny Pilot, which has been extended until October 31, 2009. Additional option classes may be added to the Penny Pilot on or before that date.

        After options transactions are executed on an exchange in the U.S., they are cleared and settled by a clearinghouse. Following the incorporation of the CBOE in 1973, the CBOE Clearing Corporation was founded to clear all options contracts. The role of a clearinghouse is to act as a guarantor for options contracts to ensure that the obligations of the contracts are fulfilled. Shortly after its founding, the CBOE Clearing Corporation became OCC and was approved by the SEC to be the central clearinghouse for all exchange-listed securities options in the U.S. OCC is the world's largest equity derivatives clearing organization and currently clears a multitude of diverse and sophisticated products, including options, futures, and options on futures. Standard & Poor's has given OCC a credit rating of "AAA."

        Due to the multitude of products cleared by OCC, it falls under the jurisdiction of both the SEC and the CFTC. The OCC is owned equally by five participant exchanges: the CBOE, NYSE Amex, LLC, the ISE, NYSE Arca, Inc. and Nasdaq OMX PHLX, Inc. BOX is a non-owner participant exchange of OCC, as is NOM. However, Nasdaq has an equity interest in OCC as a result of its acquisition of PHLX.

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        Institutional interest in the options markets has increased as a result of the options markets' increased liquidity and the shift by investors towards more sophisticated risk management techniques. Financial institutions, hedge funds and proprietary trading firms continue to commit capital to trading options contracts.

        Technological advances have enabled U.S. options exchanges, either exclusively or in combination with open-auction trading facilities, to provide electronic trading platforms. The emergence of electronic trading has been enabled by the ongoing development of sophisticated electronic order routing and matching systems, as well as advances in communication networks and protocols. This has created conditions that have improved liquidity and pricing opportunities and has been conducive to superior trade executions. In addition, the growing use of technology has decreased costs, enabling exchanges to lower fees.

        Competitive pressures and the advantages of large scale operations have provided the strategic rationale for consolidation among exchanges. The migration to shareholder structures and for-profit business models has facilitated a number of such mergers and acquisitions. For example, NYSE Euronext now owns the former Pacific Exchange and the American Stock Exchange. Deutsche Borse has acquired the International Securities Exchange, and Nasdaq has acquired the Philadelphia Stock Exchange. This trend has been occurring on a global scale and can be expected to continue.

        As competition has become increasingly intense, exchanges have adopted a number of strategies to effectively compete with their exchange counterparts, including technological and product innovation, more stringent cost controls, diversification of revenue streams and changes in corporate structure to provide enhanced strategic flexibility, streamlined corporate governance and greater access to sources of capital. Economies of scale have also become a crucial competitive factor. A number of exchanges have seen demutualization and going public as the path to competing successfully in this more challenging environment.

        "Payment for order flow" has become an important consideration in options order routing decisions by brokerage firms. Payment for order flow began when some market makers within the industry started to pay order entry firms for their customer orders, independently from any exchange on which they traded. Certain firms, in particular online and discount brokers, solicit or accept payment for their order flow. These payments have become an integral part of their business models and firms that accept payment argue that it allows them to charge their customers lower commissions.

        Under a typical payment for order flow arrangement, a firm that has order flow receives cash or other economic incentives to route its customers' orders to an exchange that has been designated by the provider of payment. Individuals or firms are willing to pay for the routing of order flow because they know, if certain other conditions are met, that they will be able to trade with a portion of all incoming orders, including those from firms with which it has payment for order flow arrangements.

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        Internalization occurs when a broker-dealer acts as principal and takes the other side of its customer's transaction. One form occurs when a full-service brokerage firms trades options as principal either to facilitate customer transactions when there was insufficient liquidity in the market, or simply to participate in the trade. As the options markets have grown, a number of these brokerage firms have entered the market making business, generally by acquiring specialist firms. This has led to a second form of internalization in which these firms direct their order flow to their own specialist units whenever possible. This type of internalization allows the firm to both earn a commission and capture the bid/ask spread, thereby increasing the profitability of the order flow they gather through their distribution system.

        In response to increased demand for the ability to internalize, exchanges have developed various market models and trading procedures to facilitate the ability of firms to direct their order flow to themselves or otherwise increase the opportunities the firm may have to interact with its own customers.

        For the past several years customers have paid little or no transaction fees in most competitively-traded options classes. Transaction fees are paid primarily by market makers and firms. More recently, several options exchanges have introduced a market model in which orders which take liquidity from the marketplace are charged a transaction fee, regardless of origin type, and orders that provide liquidity to the marketplace receive a rebate for doing so. This type of market model is attractive to participants who regularly provide liquidity but not to firms representing customer orders, as those orders are normally takers of liquidity. The longer term impact of this market model on the market shares of the options exchanges remains to be seen.

Products and Markets

        The CBOE provides a marketplace for the trading of options contracts on various underlying securities that meet criteria established in our Rules and approved by the SEC. The options contracts we list for trading include options on individual equities, options on exchange-traded funds and options on equity indexes.

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        The CBOE has developed several of its own proprietary indexes and index methodologies. These include volatility and/or variance indexes based on various broad-based market indexes, such as the S&P 500, the DJIA, the Nasdaq 100, the Russell 2000, realized variance indicators, a number of sector indexes and a series of option strategy benchmarks, including the BuyWrite, the PutWrite and the Collar indexes based on the S&P 500 and other broad-based market indexes. We also have licensed others to use some of these indexes to create products and have entered into agreements whereby we have granted to others the rights to sub-license some of these indexes. The CBOE generates revenue from the calculation and dissemination of 33 real-time index values for third party licensors, from the licensing of the CBOE indexes and from support services provided to OneChicago.

Competition

        The U.S. options industry is extremely competitive. We compete with a number of registered national securities exchanges and may compete with other exchanges or other trading venues in the future. The six other U.S. options exchanges are our primary direct competitors: the AMEX, the BOX, the ISE, the NYSE/Arca, the PHLX and NOM. In addition, on July 8, 2009, BATS Exchange Inc. announced its intention to launch an options exchange. The CBOE is the largest options exchange in the U.S. based on both total contract volume and dollar value of options traded. Our market share over the past five years has ranged from 30.6% to 33.3%. Market share for each exchange, based on total contract volume, is shown below for 2008. The CBOE's market share of the first six months of 2009 was 31.4%.

GRAPHIC

        Our challenge is to convince broker-dealers to route options orders to the CBOE rather than to our competitors and to convince liquidity providers to concentrate their market making activity on the CBOE. This is particularly true with respect to options on individual equity securities, which tend to be traded on multiple exchanges. We compete through a variety of methods, including:

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Competitive Strengths

        We believe that the CBOE has established itself as a global leader in the options industry. We believe we are well positioned to maintain and expand our status through several key competitive strengths:

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Growth Strategy

        Trading in derivative products continues to expand at a rapid pace as a result of a number of factors including increased investor access as a result of technological advances, declining costs to users, globalization and greater understanding of the products by increasingly sophisticated market participants. The CBOE is well positioned to leverage its competitive strengths to take advantage of these trends. Our growth strategy has several key components:

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Market Model

        The CBOE provides a reliable, orderly, liquid and efficient marketplace for the trading of securities options. We operate a quote-driven auction market that employs a combination of specialists, market makers and floor brokers. At the CBOE, DPMs are specialists that are charged with maintaining fair, orderly and continuous markets in specific option classes, with multiple specialists assigned to the most heavily traded options classes. DPMs trade for their own account and are not permitted to act as agent on behalf of customers. Market makers, operating in-person on the trading floor and/or from remote locations, supplement the liquidity provided by the specialists by quoting both bids and offers for their own accounts, electronically streaming their individual quotes in their assigned classes. Floor brokers act as agents on the trading floor to facilitate primarily large or complicated orders that customers choose not to direct to the electronic system.

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        Members typically perform one or more of the functions described below in their roles as members of the CBOE.

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        Several of the functions described above, namely, market maker, DPM, eDPM and LMM, are often grouped together as "liquidity providers." This name refers to the fact that they all provide liquidity to the options market through various obligations to provide to the marketplace firm quotes at which they are obligated to trade. Any of these liquidity providers may be designated as a preferred market-maker by a member firm routing an order to CBOE. The preferred market-maker is afforded a participation entitlement provided that he or she meets certain other requirements with respect to the relevant option class and quoting obligations.

        Direct access to the CBOE marketplace is granted to individuals and firms that are CBOE members. A membership entitles the member to conduct business on the exchange in one of the participant roles described above. As of July 1, 2009, the CBOE had 1,088 memberships, utilized by 213 active trading firms. A membership is required for any individual or firm that wishes to have direct access to the CBOE unless a market participant is a sponsored user of a member as further described below. There are 930 CBOE memberships that were created through the sale of CBOE seats. When we refer to "CBOE Seats" we refer exclusively to these 930 CBOE memberships. In addition, the CBOE had temporarily extended the membership status of 252 former CBOT members who were CBOE members as a result of the CBOT Exercise Right prior to the acquisition of the CBOT by the CME Group. As of July 1, 2009, a total of 112 individuals have maintained their temporarily extended membership status. In July 2008, CBOE received authorization for an additional 50 access permits, called Interim Trading Permits (ITPs), of which 46 are currently in use. These ITPs convey trading access, but not equity, in CBOE. They were issued by lottery to CBOE members and member firms.

        CBOE has a sponsored user program that permits non-member sponsored users to be provided with electronic access, through a sponsorship arrangement with a sponsoring CBOE member, to enter orders on certain CBOE trading systems. These systems include CFLEX (CBOE's electronic FLEX option trading system) and CBSX. Additionally, up to 15 sponsored users may be provided with electronic access to all other products traded on CBOE.

        Most options are traded on the CBOE both electronically and in open outcry using its Hybrid Trading System. The CBOE developed the first hybrid-trading model, in which aspects of both open-outcry and electronic trading are integrated to function as a single market. This trading model is supported by state-of-the-art technology, including the CBOEdirect trading platform. Since the CBOE equity option trading migrated to the Hybrid Trading System, a significant portion of the volume in these products has moved to electronic execution. However, for two of our most active index products, a significant portion of the volume continues to trade in open-outcry, supported by automated execution of certain types of orders.

        The Hybrid Trading System enables the CBOE market makers to each employ their own, individual pricing models and to stream their own individual quotes into the CBOE trading engine. The CBOE market makers present on the trading floor are able to both stream their quotes into the CBOE's central trading engine and to participate in open-outcry transactions effected in their trading crowd. The Hybrid System allowed the CBOE to pursue both electronic and open-outcry trading models simultaneously without sacrificing the benefits each brings.

        At the core of the Hybrid Trading System is the matching algorithm, which is the means by which trades are executed and allocated to market participants. The CBOE's technology and Rules provide

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for a variety of different algorithms for matching buyers and sellers, e.g. price/time priority. The CBOE has the ability to apply different matching algorithms to different products, and currently has two different algorithms in operation for various products. Each matching algorithm is designed to meet the needs of a particular market segment. The setting of the matching algorithm affects the share of each trade that a quoting participant receives and is central to the opportunity and profit potential of market makers and other liquidity providers.

        The CBOE's matching algorithms reward price, depth and liquidity. The Hybrid Trading System calculates the national best bid and offer (NBBO), and no order is executed at a price worse than the NBBO. The system scans all other option marketplaces, and it has the capability to route orders to other marketplaces for execution if a better price exists elsewhere via an inter-exchange system operated by the Options Clearing Corporation and known as the Options Intermarket Linkage Plan. In the second half of 2009, the U.S. options industry will transition to a new inter-market linkage model that will be based on direct access routing of inter-market orders via exchange-owned or exchange-contracted broker-dealers. The new linkage model will be based on the Reg NMS (National Market System) inter-market linkage that currently exists for U.S. equities trading, which requires price protection of the exchanges' best bids or offers (BBOs) and introduces the Intermarket Sweep Order (ISO) to options. Orders reflecting prices less than an exchange's BBO will not receive this protection under the plan.

        The Hybrid Trading System also supports off-floor participants, including remote market making, off-floor DPMs and eDPMs. In June 2004, the CBOE introduced eDPMs into 400 of the most actively traded options classes, which accounted in the aggregate for approximately 90% of average daily contract volume. Currently, eDPMs make markets in over 500 classes. Remote market making is available in all Hybrid classes, including several of the CBOE's proprietary products.

        The CBOE's market model continues to evolve as we innovate and adapt to changes in the marketplace. Details on the CBOE's technological capabilities, as well as key systems offerings employed by the CBOE members, are described below.

Technology

        The CBOE's technology supports trading on multiple exchanges: CBOE, CFE, CBSX and OneChicago. The CBOE's systems can simultaneously support multiple trading models and multiple matching algorithms per exchange. For example, different products could trade simultaneously using open outcry, screen based or a hybrid model. Within these trading models, different products can be traded using different matching algorithms. CBOEdirect has recently been enhanced to support trading options on futures.

        CBOEdirect, the central platform for the CBOE's Hybrid Trading System, was launched in 2003. The CBOEdirect platform integrates the CBOEdirect trading engine with the routing, display systems and broker handling systems that support the trading floor. It provides features of screen-based and floor-based trading in what we believe is a "best of both worlds" market model.

        The CBOE uses a quote-driven market model where liquidity providers have quoting obligations. The CBOEdirect trade engine includes the match engine, the order book and the quote processor. CBOEdirect enables the users to stream live quotes, to post quotes with size and expedite order execution. CBOEdirect accepts streaming quotes from individual Market Makers, DPMs and eDPMs, automatically executes marketable orders and opens the book to non-customers.

        CBOEdirect functionality includes: quote trigger, quote lock, Quote Risk Monitor, User Input Monitor, numerous matching and allocation algorithms, a complex order book, preferenced orders and several auction mechanisms. The various matching and allocation algorithms are configurable by

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product. Auction mechanisms exist for an automated internalization mechanism, complex orders, and for marketable orders whether or not the CBOE is at the NBBO.

        CBOEdirect's underlying technology is a Java application with an infrastructure designed for high performance.

        The technology is designed to be scalable for capacity and throughput.

        The CBOE's trading platform is capable of accommodating significantly more than the approximate 5,700 distinct options symbols and 285,000 options series currently trading on the exchange. In addition to simple orders, the CBOE's systems support trading spreads and other complex orders, as well as options that expire weekly.

        The CBOE's system is scalable to accommodate the increasing needs of the industry. Over the past 12 months, the CBOE has transmitted to OPRA peaks of over 350,000 quotes per second.

        The CBOE has a session-based system design that allows for a quick introduction of different types of derivative and securities products, including options, futures, options on futures and stock products. In addition, the CBOE's systems facilitate different trading models, allowing the CBOE to move from a floor-based model to a screen-based model.         The CBOE and each of the other U.S. options exchanges have electronic support for multiple quoters, trade entry by order flow providers and specific algorithms to allocate trades. CBOE uses multiple matching algorithms, configurable by product. The CBOE accepts from its users and disseminates to OPRA more quotes than any other exchange.

        The CBOE provides multiple application programming interfaces, or APIs, to facilitate both quote and order entry as well as auction processing. These include a proprietary API called CBOE Member interface, or CMi, and the industry-standard Financial Information Exchange, or FIX, and a customized version of the Common Message Switch, or CMS.

        The CBOE's order routing system allows members to use the CMS format for orders, FIX or CMi. In 2008, the CBOE completed the migration of the order routing system, electronic market linkage and functions that support non-hybrid trading from the mainframe to the CBOEdirect platform.

        The CBOE's Trade Match system uses CBOEdirect technology. It sends matched trades to the OCC, which then settles and clears the trades. The Trade Match system currently provides matched trade information to clearing firms via CBOEdirect technology. This web-based interface also gives brokers access to their trades and related account information.

        The CBOE's ticker plant, XTP, takes in market data feeds from CTS/CQS, Nasdaq, the CBOT, the CME and other sources and disseminates the data internally to other systems on a publish/subscribe basis. XTP's most recent processing peak was 882,000 messages per second, or MPS, inbound from the OPRA, with over 6 billion messages per day.

        The CBOE disseminates options market data to OPRA and to its members via FIX and CMi. The CBOE also uses Ticker Express to provide fast, accurate market data to its members. CFE disseminates futures market data via the CBOE Financial Network, or CFN, CBOE's futures market data network. The CBOE has a fully integrated real-time system to track electronic trading for Help Desk troubleshooting and Regulatory analysis. The CBOE also has an extensive data warehouse with terabytes of historical trading data that provides fast and easy access to data for analysis.

        The CBOE has developed an off-site disaster recovery facility to help ensure continuity of trading on a next-day basis in the event of a disaster that would require closing the CBOE's building.

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CBOEdirect is the disaster recovery platform. The disaster recovery site provides backup for all CBOEdirect products including index options, futures, options on futures, equities and all equity options.

        OCC clears the CBOE's options products. OCC acts as the issuer, counter party and guarantor for all options contracts traded on the CBOE and other U.S. securities exchanges. Upon execution of an option trade, we transmit to OCC a record of all trading activity for clearing and settlement purposes. OCC fulfills these same functions for futures products traded on the CBOE's wholly-owned futures subsidiary, CFE. The National Securities Clearing Corporation clears the CBOE's stock and ETF products.

Options Price Reporting Authority (OPRA)

        Our markets generate valuable information regarding the prices of our products and the trading activity in those markets. Market data relating to price and size of market quotations and the price and size of trades is collected and consolidated by OPRA. OPRA disseminates the information to vendors who redistribute the data to brokers, investors and other persons or entities that use our markets or that monitor general economic conditions, such as financial information providers, broker-dealers, banks, futures commission merchants, public and private pension funds, investment companies, mutual funds, insurance companies, hedge funds, commodity pools, individual investors and other financial services companies or organizations. After costs are deducted the fees collected are distributed among exchange participants based on their transaction volumes pursuant to the OPRA Plan. As of July 1, 2009, our market data was displayed on approximately 182,000 terminals worldwide.

        Through our subsidiary, Market Data Express, LLC, or MDX, we are expanding our market data offerings. MDX is an OPRA vendor and can provide the consolidated OPRA data. MDX also offers, or may in the future offer, a range of additional data services, including information on market depth, information on specialized indexes with related settlement values, time and sales information and specialized reports of historical market data.

Other Business Relationships

        In addition to its options operation, the CBOE is an owner of or an investor in several related organizations:

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        The CBOE also has long-term business relationships with several providers of market indexes. The CBOE licenses these indexes as the basis for cash-settled index options. In some instances, these licenses provide the CBOE with the exclusive right to trade cash-settled options contracts based on these indexes. Of particular note are the following:

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        The CBOE is also a party to licenses granting us the right to create options contracts based on certain indexes developed by Morgan Stanley.

Information Sharing

        The CBOE has Information Sharing Agreements, Market Surveillance Agreements and Memoranda of Understanding with over 20 exchanges outside the U.S. for the purpose of sharing information related to specific regulatory investigations. These agreements also facilitate the listing of options on indexes on foreign stocks and options on exchange-traded funds based on those indexes. In addition to these bilateral agreements, the CBOE is a member of the Intermarket Surveillance Group, which consists of over 30 exchanges and regulatory organizations both within and outside the U.S. The Intermarket Surveillance Group serves this same purpose of providing for the sharing of information under specific circumstances related to the enforcement of regulations.

        In 2005, the CBOE entered into a series of Memorandums of Understanding with the three futures exchanges and the two stock exchanges in the Peoples Republic of China. As of October 1, 2008, no options or other financial derivatives are traded on these markets. These agreements govern the sharing of information on market and product development and provide for the CBOE to potentially work with these exchanges toward the development of new markets for derivative products. Similar agreements have also been entered into with the Korea Exchange, the Taiwan Futures Exchange, the China Financial Futures Exchange and the Thailand Futures Exchange.

Intellectual Property

        The CBOE's intellectual property assets include the above-referenced license rights, proprietary indexes created and calculated by the CBOE and the methodologies used to calculate several of the CBOE's proprietary indexes, patents and patents pending on certain CBOE technologies and products, the CBOE market data, trade secrets and various trademarks, service marks and internet domain names that are used in conjunction with the CBOE, its products and services. We attempt to protect this intellectual property by seeking patents, applying for copyright and trademark registrations, taking steps to protect our trade secrets, entering into appropriate contract provisions and other methods.

        We review our systems, products and methods of doing business to identify properties that should be protected, and we undertake to establish appropriate protections. As a result, we have rights to a number of patents and pending patent applications in the United States and other countries throughout the world.

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        We own or have trademark rights in many of the product names, trade names, trademarks and service marks that we use in conjunction with our services. ACCEPT NO SUBSTITUTE®, CHICAGO BOARD OPTIONS EXCHANGE®, CBOE®, CBOEDIRECT®, CBSX®, CBOE STOCK EXCHANGE®, CBOE VOLATILITY INDEX®, BE A BETTER INVESTOR®, CAPS®, CEBO®, CFE®, CFLEX®, FLEX®, FLEXIBLE EXCHANGE®, GAS AT THE PUMP®, HYBRID®, HYTS®, IT'S ABOUT TIME®, LEAPS®, MARKET DATA EXPRESS®, MDX®, MNX®, OEX®, POWERPACKS®, THE OPTIONS INSTITUTE®, THE OPTONS TOOLBOX®, VIX®, VARB-X®, WHY BUY A STOCK WHEN YOU CAN LEASE IT?® and XEO® are our registered U.S. trademarks or servicemarks. We also have filed applications to register trademarks in the U.S. that are currently pending and/or have common law rights in numerous marks, including, among others, ASK THE INSTITUTESM, BEST EXECUTION ASSURANCE PROGRAMSM, BUYWRITESM, BXMSM, BXOSM, CBOEFLEX.NETSM,CBOE-TVSM, C2SM, CESOSM, CEFLEXSM, CHICAGO FUTURES EXCHANGESM, COBRASSM, COBWEBSM, THE EXCHANGESM, GAPPSM, INDEX WORKBENCH™, LASRSSM, LONG-TERM EQUITY ANTICIPATION SECURITIESSM, MAKE I CONTACTSM, NO SUBSTITUTESM, OPTIONSINSTITUTEPLUSSM, PUTSM, PUTWRITESM, SPXSM, THE EXCHANGE OF VISIONSM, THE OPTIONS INITIATIVESM, THE OPTIONS INTENSIVESM, THE OPTIONS TOOLBOXSM, THE OPTIONS TRANSITIONSM, RVXSM, ULTIMATE MATCHING ALGORITHMSM, VXDSM, VXNSM, VPDSM, VPNSM, VTYSM, VXOSM and VXVSM, WEEKLYSSM, WE GIVE YOU OPTIONSSM and XSPSM.

        We also use many trademarks that are owned by third parties, either pursuant to licenses granted to us or merely to refer factually to products that are traded on our markets, or pursuant to licenses granted to us including but not limited to: Standard & Poor's®, S&P®, S&P 500®, Standard & Poor's Depositary Receipts®, SPDR®, Standard & Poor's 500, Russell 1000®, Russell 2000®, Russell 3000®, Russell MidCap, Dow Jones, DJIA, Dow Jones Industrial Average, Dow Jones Transportation Average, Dow Jones Utility Average, DIAMONDS, The Nasdaq-100 Index®, Nasdaq-100®, The Nasdaq National Market®, Nasdaq®, Nasdaq-100 Shares, Nasdaq-100 Trust, Morgan Stanley Retail Index, MSCI, EAFE, iShares, BGI and the MSCI index names.

Employees

        As of June 30, 2009, we employed 596 individuals. Of these employees, 233 were involved in systems development or operations, 107 were involved in direct support of trading operations and 86 were involved in regulatory activities. The remaining 170 personnel provide marketing, education, financial, legal, administrative and managerial support. Our seven building engineers are the only employees covered by a collective bargaining agreement. Management believes that we have strong relationships with our employees.

Facilities

        Our principal offices are located at 400 South LaSalle Street, Chicago, Illinois 60605. Through our wholly-owned subsidiary, Chicago Options Exchange Building Corporation, we own the building in which our principal offices are located and occupy approximately 350,000 square feet of this building. We also lease 23,828 square feet of office space at 111 West Jackson Boulevard, which houses our Regulatory Division. The lease on this space expires in 2011. In addition, the CBOE maintains a New York representative office at 61 Broadway, New York, New York 10006. That lease on 2,881 square feet expires in 2012 and contains an option to renew for an additional five years. We also lease 3,300 square feet of space outside the City of Chicago for our disaster recovery facility. The lease on that facility expires in 2010, but we have an option to extend it for a year. Finally, we lease 2,022 square feet of space located in the New York metropolitan area for C2, our new alternative options exchange. The lease on that space expires in 2013 and includes an option to renew for two additional years. We believe the space we occupy is sufficient to meet our future needs.

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Legal Proceedings

        The CBOE was or is currently a party to the following legal proceedings:

        On August 23, 2006, the CBOE and its directors were sued in the Court of Chancery of the State of Delaware, by the CBOT, CBOT Holdings and two members of the CBOT who purport to represent a class of individuals ("Exercise Member Claimants") who claim that they were, or had the right to become, members of the CBOE pursuant to the Exercise Right granted to CBOT members in paragraph (b) of Article Fifth of the CBOE's certificate of incorporation. Plaintiffs sought a judicial declaration that class members were entitled to receive the same consideration in the CBOE's restructuring transaction as all other CBOE members, and plaintiffs also sought an injunction to bar CBOE and CBOE's directors from issuing any stock to CBOE seat owners as part of the restructuring transaction, unless class members received the same stock and other consideration as other CBOE seat owners.

        On October 17, 2006 CBOT Holdings announced its intention to merge with and into CME Holdings (the "CME/CBOT Transaction"). In response to that announcement, the CBOE determined that the proper interpretation of Article Fifth(b) was that, upon the closing of the CME/CBOT Transaction, no one would qualify as a CBOT "member" for purposes of Article Fifth(b) and therefore no one would be eligible to become or remain an exercise member of the CBOE. The CBOE submitted its interpretation (the "Eligibility Rule Filing") for review and approval by the SEC on December 12, 2006, as required because of the CBOE's status as a national securities exchange, and CBOE amended that submission on January 16, 2007. On January 4, 2007, plaintiffs filed a second amended complaint that challenged the CBOE's interpretation of Article Fifth(b). On January 11, 2007, plaintiffs submitted a motion for partial summary judgment on their claims. On January 16, 2007, the CBOE and the director defendants moved to dismiss the second amended complaint to the extent it challenged the CBOE's interpretation, on the ground that the SEC's jurisdiction to consider such interpretations of Article Fifth(b) preempts any state law challenge to that interpretation.

        On February 22, 2007, CBOE and the other defendants filed a brief in support of their motion to dismiss (on the ground of federal preemption) any complaint about CBOE's Eligibility Rule Filing and to stay consideration of any other issues in the complaint. On May 30, 2007, the Court heard argument on defendants' motion to dismiss and plaintiffs' motion for partial summary judgment.

        On July 20, 2007, CBOT and the other plaintiffs filed a motion requesting that the Court enter a temporary restraining order prohibiting CBOE from implementing or enforcing an interpretation of Rule 3.19 (the "Interim Access Interpretation"). That interpretation had temporarily extended membership status to persons who were Exercise Member Claimants on specified dates close to the closing of the CME/CBOT Transaction, and the interpretation further provided for that temporary membership status during the period beginning with the closing of the CME/CBOT Transaction and ending when the SEC took action on CBOE's Eligibility Rule Filing. The Interim Access Interpretation went into effect upon its filing. On August 3, 2007, the Court denied the motion for a temporary restraining order.

        On August 3, 2007, in response to defendants' motion to dismiss or for a stay, the Court stayed further litigation until the SEC took final action on CBOE's Eligibility Rule Filing. The Court retained jurisdiction over any contract and property claims, and over any "economic rights," that might remain at issue after the SEC's action.

        On August 23, 2007, following the Court's denial of the request for injunctive relief with respect to the Interim Access Interpretation, plaintiffs filed a comment letter with the SEC requesting that the SEC abrogate that rule interpretation. CBOE opposed this request. The 60-day abrogation period set forth in Section 19 of the Exchange Act expired on August 31, 2007 without the SEC taking any action

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to abrogate. As a result, the Interim Access Interpretation remained in effect pending SEC action on the Eligibility Rule Filing.

        On September 10, 2007, CBOE filed another interpretation of CBOE Rule 3.19 (the "Continued Membership Interpretation"), which was effective on filing although it was to become operational only upon the SEC's approval of the Eligibility Rule Filing. Under this new interpretation, the temporary membership status of persons whose membership status had been extended under the original Interim Access Interpretation would continue in effect after the SEC's approval of the Eligibility Rule Filing. CBOT and others requested that the SEC abrogate the Continued Membership Interpretation filing, but the 60-day abrogation period set forth in Section 19 of the Exchange Act expired without the SEC taking any action to abrogate. As a result, the Continued Membership Interpretation remains in effect.

        On October 2, 2007, CBOT and the other plaintiffs filed a motion requesting that the Court lift the stay to allow them to file a third amended complaint and to begin discovery. CBOE filed its opposition to that motion on October 5, 2007. On October 10, 2007, the Court denied plaintiffs' motion to lift the stay because it found that the future course of the litigation, if any, would likely be influenced in significant part by the action taken by the SEC on the Eligibility Rule Filing.

        On January 15, 2008, the SEC issued a final order approving the Eligibility Rule Filing. The SEC recognized that "the actions of the CBOT necessitated CBOE's interpretation of Article Fifth(b) to clarify whether the substantive rights of a former CBOT member would continue to qualify that person as a 'member of [the CBOT]' pursuant to Article Fifth(b) in response to changes in the ownership of the CBOT."

        Plaintiffs filed a third amended complaint on February 6, 2008. Plaintiffs' essential claims remained the same, although plaintiffs alleged in their new complaint that the adoption of the Interim Access Interpretation damaged so-called CBOT full members in their capacity as owners and lessors of such memberships and that CBOE's Board of Directors was dominated by interested directors when it approved the Eligibility Rule Filing, the Interim Access Interpretation and the Continued Membership Interpretation. On February 7, 2008, CBOE moved for summary judgment in its favor on all counts, based principally on the SEC's approval of CBOE's rule interpretation in the Eligibility Rule Filing that no person qualifies to become or remain an exercise member of CBOE pursuant to Article Fifth(b) following the CME/CBOT Transaction. CBOE and the other defendants filed their answer to plaintiffs' third amended complaint on March 11, 2008.

        On March 14, 2008, CBOT and two CBOT members appealed to the United States Court of Appeals for the District of Columbia from the SEC order that approved the Eligibility Rule Filing, and CBOE was granted leave to intervene in that appeal. The Court of Appeals subsequently ruled that further proceedings in that appeal would be held in abeyance pending either the resolution of the issues pending in the Delaware Court or the consummation of the settlement discussed below.

        On March 19, 2008, plaintiffs submitted a renewed motion for partial summary judgment to the Delaware Court. Plaintiffs requested a declaratory judgment that the CME/CBOT Transaction did not extinguish the exercise right eligibility of "Eligible CBOT Full Members" and that "Eligible CBOT Full Members" are entitled to receive the same consideration that would be provided to CBOE's seat owners in connection with any CBOE demutualization.

        On April 21, 2008, in order to simplify the issues before the Court and to narrow the scope of the discovery practice prior to the Court's ruling on the parties' summary judgment motions, CBOE and the other defendants filed an amended motion for partial summary judgment that excluded plaintiffs' state law claims related to the Interim Access Interpretation and the Continued Membership Interpretation. Among other grounds, CBOE's amended motion argued that, pursuant to the doctrine of federal preemption, the SEC's approval eliminated the foundation of the state law claims asserted by plaintiffs regarding the Eligibility Rule Filing. Briefing on the cross motions for summary judgment was completed on May 12, 2008, and argument was scheduled on those motions for June 4, 2008.

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        On June 2, 2008, two days before the Delaware Court was to hear argument on the cross-motions for summary judgment, the parties entered into a written agreement in principle to settle both the Delaware litigation and the appeal of the SEC order pending in the federal Court of Appeals. On August 20, 2008, the parties entered into a definitive Stipulation of Settlement, and that agreement was preliminarily approved by the Delaware Court on August 22, 2008. We refer to the Stipulation of Settlement as the Settlement Agreement.

        A number of individuals and entities have filed a series of objections to the terms of the Settlement Agreement, and some amendments to the Settlement Agreement have been made to address those objections. (The current terms of the Settlement Agreement are described on page 51). The objections primarily raise issues concerning (1) the definition of the settlement class, (2) the criteria that must be satisfied in order for a class member to become a "participating" settlement class member and thereby receive a share of the settlement consideration, (3) the determination by class representatives and class counsel that particular persons did not satisfy those criteria and (4) the conduct of the class representatives and class counsel when they negotiated the Settlement Agreement.

        On December 16, 2008, the Delaware Court conducted a lengthy hearing to consider whether to approve the settlement of the litigation and to consider the objections to the proposed settlement. At the conclusion of the hearing, the Court indicated that it would issue a comprehensive written opinion, but it did not indicate when that decision would be forthcoming.

        On June 3, 2009, the Delaware Court entered an order approving the Settlement Agreement, while reserving ruling on whether certain objectors were eligible to participate in that settlement. After subsequently ruling on those objections, the Delaware Court, on July 29, 2009, entered a final order approving the Settlement Agreement, resolving all open issues about the settlement and dismissing the Delaware litigation. The order is subject to any appeals that may be filed by August 28, 2009. No appeals had been filed as of the date this registration statement was filed.

        On November 7, 2005, an amended and consolidated complaint (the "Consolidated Complaint") was filed on behalf of Last Atlantis Capital LLC, Lola L.L.C., Lulu L.L.C., Goodbuddy Society L.L.C., Friendly Trading L.L.C., Speed Trading, LLC, Bryan Rule, Brad Martin and River North Investors LLC in the U.S. District Court for the Northern District of Illinois against the CBOE, three other options exchanges and 35 market maker defendant groups (the "Specialist Defendants"). The Consolidated Complaint combined complaints that had been filed by Bryan Rule and Brad Martin with an amendment of a previously dismissed complaint (the "Original Complaint") that originally had been brought by a number of the other plaintiffs. The Consolidated Complaint raised claims for securities fraud, breach of contract, common law fraud, breach of fiduciary duty, violations of the Illinois Consumer Fraud and Deceptive Trade Practices Act and tortious interference with plaintiffs' business and contracts. The previously dismissed Original Complaint also had brought claims under the antitrust laws, and the dismissal of those claims remains subject to appeal.

        With regard to the CBOE, the Consolidated Complaint alleged that the CBOE and the other exchange defendants knowingly allowed the Specialist Defendants to discriminate against the plaintiffs' electronic orders or facilitated such discrimination, failed adequately to investigate complaints about such alleged discrimination, allowed the Specialist Defendants to violate CBOE's Rules and the rules of the SEC, failed to discipline the Specialist Defendants, falsely represented and guaranteed that electronically entered orders would be executed immediately and knowingly or recklessly participated in, assisted and concealed a fraudulent scheme by which the defendants supposedly denied the customers the electronic executions to which they claim they were entitled. Plaintiffs sought unspecified compensatory damages, related injunctive relief, attorneys' fees and other fees and costs.

        On September 13, 2006, the Court dismissed the Consolidated Complaint in its entirety and entered judgment in favor of all defendants. On March 22, 2007, the Court denied plaintiffs' request to

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reconsider the dismissal of the claims against CBOE and held that the prior dismissal of those claims with prejudice would stand. The Court, however, granted plaintiffs' motion to reconsider the dismissal of the claims against the Specialist Defendants and ordered plaintiffs to file another amended complaint asserting only their claims against the Specialist Defendants.

        Since 2007, the claims against a number of Specialist Defendants have been dismissed. Plaintiffs, however, will be able to appeal the dismissal of their claims against CBOE after the Court disposes of all of the claims that remain pending against the remaining Specialist Defendants.

        On November 2, 2006, the ISE and its parent company filed a lawsuit in federal court in the Southern District of New York against The McGraw-Hill Companies, Inc. ("McGraw-Hill") and Dow Jones & Co. ("Dow Jones"), the owners, respectively, of the S&P 500 Index and the DJIA, which are the basis for index options, or "SPX options" and "DJX options," respectively, that the CBOE trades pursuant to exclusive licenses from McGraw-Hill and Dow Jones. The CBOE is not a party in this lawsuit. The ISE seeks a judicial declaration that it may list and trade SPX and DJX options without a license and without regard to the CBOE's exclusive licenses to trade options on those indexes, on the ground that any state-law claims based on the unlicensed listing of SPX and DJX options allegedly would be preempted by the federal Copyright Act and because McGraw-Hill and Dow Jones supposedly cannot state an actionable copyright claim. McGraw-Hill and Dow Jones filed a motion to dismiss this action on December 22, 2006, on the ground that there is no federal jurisdiction over this dispute. This motion has not been decided. Consistent with the jurisdictional position of McGraw-Hill and Dow Jones, those parties joined with the CBOE to file a state court action in Illinois on November 15, 2006 against the ISE and OCC, (the "Illinois action"). In the Illinois action, the CBOE and the other plaintiffs seek a judicial declaration that the ISE may not list, or offer trading of, SPX or DJX options because of both the proprietary rights of McGraw-Hill and Dow Jones in the underlying indexes and the CBOE's exclusive license rights to trade such options. The Illinois action alleges that the ISE's threatened action would misappropriate the proprietary interests of McGraw-Hill and Dow Jones and the exclusive license rights of the CBOE, would interfere with the CBOE's prospective business relationships with its members firms and customers and would constitute unfair competition. On December 12, 2006, the ISE removed the Illinois action to federal court in the Northern District of Illinois. On December 15, 2006, the CBOE and the other plaintiffs in the Illinois action moved to remand the matter to the Illinois state court on the ground that there is no federal jurisdiction over the claims. The federal court granted the motion to remand the Illinois action to state court, where it is now pending. The ISE moved to dismiss or stay the Illinois action on the alternative grounds of inconvenient forum and the prior-pending suit it filed in New York. The CBOE and the other plaintiffs opposed the ISE's motion and on May 15, 2007, the Illinois circuit court denied ISE's motion to dismiss or stay. The ISE appealed the denial of its request for a stay, and the Illinois Appellate Court denied the ISE's motion for leave to appeal the denial of the ISE's motion to dismiss on the basis that the Illinois court is an inconvenient forum. The federal court in New York granted a motion by Dow Jones and McGraw-Hill to stay the New York action pending resolution of the Illinois action. The ISE appealed the federal court's stay of the New York action it initiated.

        On June 2, 2008, the Illinois appellate court affirmed the Illinois circuit court's decision denying ISE's motion to dismiss or stay, which was based on ISE's argument that the case should be decided in a prior-pending lawsuit by ISE in New York federal court. ISE's New York federal lawsuit remains stayed. The federal Appellate Court in New York affirmed the district court's stay on January 8, 2009, after hearing oral arguments on January 5.

        On March 23, 2009, based on an allegation of copyright preemption, ISE filed a motion to dismiss the complaint CBOE and its co-plaintiffs. On April 14, 2009, the Illinois trial court denied ISE's motion to dismiss. On May 1, 2009, ISE filed a motion in the Illinois Supreme Court for leave to file a writ of prohibition, or alternatively, for a supervisory order directing the Illinois trial court to dismiss

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the action for an alleged lack of subject matter jurisdiction. CBOE and the other plaintiffs filed an objection in response on May 8, 2009. On June 15, 2009, the Illinois Supreme Court denied ISE's motion. The parties are engaged in discovery in the Illinois state action, including depositions of CBOE and ISE witnesses. No schedule for trial has been set by the Illinois trial court.

        On November 22, 2006, the ISE filed an action in federal court in the Southern District of New York claiming that CBOE's Hybrid trading system infringes ISE's patent directed towards an automated exchange for trading derivative securities. On January 31, 2007, the CBOE filed an action in federal court in the Northern District of Illinois seeking a declaratory judgment that the ISE patent that is the subject of the action in New York, and two other patents that the ISE had raised in communications with the CBOE, are either not infringed and/or not valid and/or not enforceable against the CBOE. On February 5, 2007, the CBOE filed a motion to transfer the matter pending in the Southern District of New York to federal court in the Northern District of Illinois. On May 24, 2007, the magistrate judge for the Southern District of New York recommended that the motion to transfer be granted, and the case was transferred on August 9, 2007 after the district court adopted the magistrate judge's recommendation. On October 16, 2007, CBOE and ISE entered into a stipulated order for the dismissal of any patent infringement claims that ISE may have against CBOE for patent infringement of U.S. Patents Nos. 6,377,940 and/or 6,405,180. ISE has also executed a covenant not to sue CBOE in relation to U.S. Patents Nos. 6,377,940 and 6,405,180. Although fact discovery is now closed, a few remaining depositions of CBOE and ISE witnesses are proceeding on the remaining patent infringement claim related to U.S. Patent No. 6,618,707. A pretrial hearing (known as a "Markman hearing") is scheduled for August 14, 2009, during which the judge will examine evidence from the parties on the appropriate meanings of relevant key words used in the patent claims asserted against the CBOE. The case is scheduled to be ready for trial by February 2010.

        On July 22, 2009, Realtime Data, LLC d/b/a/ IXO ("Realtime") filed a complaint in the Eastern District of Texas (the "Texas action") claiming that CME Group Inc., BATS Trading, Inc., ISE, NASDAQ OMX Group, Inc., NYSE Euronext and the Options Price Reporting Authority ("OPRA") infringed four Realtime patents by using, selling or offering for sale data compression products or services allegedly covered by those patents. Although CBOE was not initially named in the Texas action, the allegations in that case created a controversy as to whether CBOE infringed one or more of the four Realtime patents. Accordingly, on July 24, 2009, CBOE filed an action against Realtime in the Northern District of Illinois ("Illinois action") seeking a declaratory judgment that the four patents are not infringed by CBOE and are not valid and/or are not enforceable against CBOE. On July 27, 2009, Realtime filed an amended complaint in the Texas action to add CBOE as a defendant. In that amended complaint, Realtime claims that CBOE, along with the exchanges listed above, directs and controls the activities of OPRA and that OPRA and CBOE, among others, use, sell, or offer for sale data compression products or services allegedly covered by the Realtime patents. The amended complaint in the Texas action seeks declaratory and injunctive relief as well as unspecified damages, attorneys fees, costs and expenses. Other than the filing of the complaint in the Illinois action and the amended complaint in the Texas action, no substantive actions have been taken in either lawsuit.

        As a self-regulatory organization under the jurisdiction of the SEC, and as a designated contract market under the jurisdiction of the CFTC, CBOE and CFE are subject to routine reviews and inspections by the SEC and the CFTC. CBOE is also currently a party to various other legal proceedings. Management does not believe that the outcome of any of these reviews, inspections or other legal proceedings will have a material impact on the consolidated financial position, results of operations or cash flows of CBOE; however, litigation is subject to many uncertainties, and the outcome of individual litigated matters is not predictable with assurance.

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REGULATION

        Federal securities laws have established a two-tiered system for the regulation of securities markets and market participants. The first tier consists of the SEC, which has primary responsibility for enforcing federal securities laws. The second tier consists of SROs, which are non-governmental entities that must register with and are regulated by the SEC. The CBOE is an SRO, registered under Section 6 of the Exchange Act as a "national securities exchange" and is subject to oversight by the SEC.

        SROs in the securities industry are an essential component of the regulatory scheme of the Exchange Act for providing fair and orderly markets and protecting investors. To be registered as a national securities exchange, an exchange must successfully undergo a rigorous application and review process with the SEC before beginning operations. Among other things, the SEC must determine that the exchange has the capacity to carry out the purposes of the Exchange Act. An SRO must comply with the Exchange Act and have the ability to enforce compliance by its members and persons associated with its members, with the provisions of the Exchange Act, the rules and regulations thereunder and the rules of the exchange. The CBOE obtained SEC approval and began operations on April 26, 1973.

        In general, an SRO is responsible for regulating its members through the adoption and enforcement of rules governing the business conduct of its members. The rules of the exchange must also assure fair representation of its members in the selection of its directors and administration of its affairs and, among other things, provide that one or more directors be representative of issuers and investors and not be associated with a member of the exchange or with a broker or dealer. Additionally, the rules of the exchange must be adequate to ensure fair dealing and to protect investors and may not impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Exchange Act.

        As a registered national securities exchange, virtually all facets of our operation are subject to the SEC's oversight, as prescribed by the Exchange Act. The Exchange Act and the rules thereunder impose on us many regulatory and operational responsibilities, including the day-to-day responsibilities for market and broker-dealer oversight. We are also subject to periodic and special examinations by the SEC. Furthermore, as an SRO, we are potentially subject to regulatory or legal action by the SEC or other interested parties. The SEC also has broad enforcement powers to censure, fine, issue cease-and-desist orders, prohibit us from engaging in some of our businesses, suspend or revoke our designation as a registered securities exchange or to remove or censure any of our officers or directors who violate applicable laws or regulations.

        As part of its regulatory oversight, the SEC conducts periodic reviews and inspections of exchanges, and we have been subject to a number of routine reviews and inspections by the SEC since we began operations. To the extent such reviews and inspections result in regulatory or other changes, we may be required to modify the manner in which we conduct our business, which may adversely affect our business.

        In November 2004, the SEC proposed corporate governance, transparency, oversight and ownership rules for SROs akin to standards required of public companies under the Sarbanes-Oxley Act of 2002. The SEC also issued a concept release examining the efficacy of self-regulation by SROs. See "—Recent Regulatory Developments" for a discussion of these proposals and the concept release.

        We are also subject to the record keeping requirements of Section 17 of the Exchange Act, including the requirement pursuant to Section 17(b) of the Exchange Act to make certain records available to the SEC for examination. If we complete the proposed restructuring transaction, CBOE Holdings may also be subject to similar requirements imposed by the Exchange Act.

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        Section 19 of the Exchange Act also provides that we must submit proposed changes to any of our Rules, policies and practices, including revisions of our certificate of incorporation and Constitution. The SEC will typically publish the proposal for public comment, following which the SEC may approve, disapprove or abrogate the proposal, as it deems appropriate. The SEC's action is designed to ensure that our Rules and procedures are consistent with the Exchange Act and the rules and regulations under the Exchange Act.

        If we complete the restructuring transaction as proposed, certain aspects of CBOE Holdings may be subject to SEC oversight, including certain ownership and voting restrictions on its stockholders. The focus of the SEC's regulation of CBOE Holdings will be to assure adequate representation of Trading Permit Holders and public market participants in the governance of our exchange, as well as to ensure that our exchange can satisfy its regulatory responsibilities under the Exchange Act. See "Description of CBOE Holdings Capital Stock" on page 146. Furthermore, if we complete the proposed restructuring transaction, the SEC will require that CBOE Holdings give due regard to the preservation of the independence of the self-regulatory function of our exchange and to CBOE Holdings' obligations to investors and the general public. The SEC will also require that we not take any actions that would interfere with the effectuation of any decisions by the board of directors of our exchange relating to its regulatory functions or the structure of the market that it regulates or that would interfere with the ability of our exchange to carry out its responsibilities under the Exchange Act. To the extent that CBOE Holdings' business activities involve or relate to our exchange, the officers and directors of CBOE Holdings may be deemed to be officers and directors of the exchange for purposes of and subject to oversight under the federal securities laws. Accordingly, the SEC may exercise direct supervision and disciplinary authority over certain CBOE Holdings' activities, and those activities may be subject to SEC approval and, in some cases, public notice and comment. See "The Restructuring Transaction—Regulatory Approvals" above.

Regulatory Responsibilities

        The CBOE is responsible for taking steps to ensure that its members comply with the CBOE's Rules and with the applicable rules of the SEC. The main activities that the CBOE engages in to measure member compliance with these rules include: (1) the review of surveillance exception reports designed to detect violations of CBOE trading rules; (2) the review of surveillance exception reports designed to detect possible manipulation; (3) the further investigation of matters deemed to be problematic upon review of the exception reports or matters deemed to be problematic as a result of examinations; (4) the investigation of complaints about possible rule violations brought by customers, members or other SROs; and (5) the examination of CBOE members for compliance with rules related to net capital, short sales, books and records and other related matters. As further described below, the CBOE is also responsible for reviewing its members' activities related to the conduct of business directly with public customers, or sales practice. The CBOE has delegated its responsibility to conduct sales practice examinations for options to the Financial Industry Regulatory Authority, or FINRA.

        The CBOE's Member and Regulatory Services Division performs the same types of regulatory functions for the CBSX as it does for the CBOE itself. As it has done for options, the CBOE has delegated its responsibilities to conduct sale practice examinations to FINRA with respect to CBSX trading permit holders.

        Section 17(d) of the Exchange Act and the related Exchange Act rules permit SROs to allocate certain regulatory responsibilities to avoid duplicative oversight and regulation. Under Exchange Act Rule 17d-1, the SEC designates one SRO to be the Designated Examining Authority, or DEA, for each broker-dealer that is a member of more than one SRO. The DEA is responsible for the regulatory oversight of the financial aspects of that broker-dealer. We are the DEA for many of our members.

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        Exchange Act Rule 17d-2 permits SROs to enter into agreements, commonly called Rule 17d-2 agreements, which are approved by the SEC and concern the enforcement of rules applicable to all of those SROs and relating to members those SROs have in common. In November 2006, all of the options exchanges, the National Association of Securities Dealers, or the NASD, and the NYSE entered into an Options Sales Practices Agreement, or the "Sales Practice 17d-2 Agreement," which is a Rule 17d-2 agreement. Under the Sales Practice 17d-2 Agreement, the NASD and the NYSE are the only SROs responsible for enforcing rules related to options sales practices for any members that are members of either NASD or NYSE or both. In July 2007, the NASD was consolidated with the member regulation, enforcement and arbitration functions of the New York Stock Exchange to form FINRA. FINRA is now responsible for conducting these sales practice examinations. Under this agreement, the CBOE is relieved of regulatory responsibility with respect to sales practice for members that are allocated to FINRA or to the NYSE under the Sales Practice 17d-2 Agreement. In December 2007, the SEC approved a different 17d-2 agreement among all of the options exchanges and FINRA, which allocated responsibility to each of the participants for ensuring that their allocated common members complied with the rules governing the submission of expiring exercise declarations. In October 2008, the Sales Practice 17d-2 Agreement was expanded to allocate responsibility to each of the participants for ensuring that their allocated common members complied with the rules governing options position limits. It is anticipated that the scope of this Sales Practice 17d-2 Agreement may be expanded to include the allocation of other regulatory responsibilities in the future.

        On June 5, 2006, the SEC approved a national market system plan named the Options Regulatory Surveillance Authority, or ORSA, Plan. The purpose of the ORSA Plan is to permit the seven U.S. securities options exchanges to act jointly in the administration, operation, and maintenance of a regulatory system for the surveillance, investigation and detection of the unlawful use of undisclosed, material information in trading in one or more of their markets. Through the sharing of the costs of these regulatory activities and the sharing of the regulatory information generated under the ORSA Plan, the ORSA Plan is intended to enhance the effectiveness and efficiency with which the exchanges regulate their respective markets and the national market system for options and to avoid duplication of certain regulatory efforts. The ORSA Policy Committee has determined to delegate the operation of the surveillance and investigative facility contemplated by the ORSA Plan to the CBOE. The exchanges have entered into a Regulatory Services Agreement with the CBOE, as service provider, pursuant to which the CBOE performs certain regulatory and surveillance functions under the ORSA Plan and uses its automated insider trading surveillance system to perform these functions on behalf of the exchanges. The ORSA Plan permits the exchanges to provide for the joint performance of other regulatory or surveillance functions or activities that the exchanges determine to bring within the scope of the ORSA Plan, but any determination to expand the functions or activities under the ORSA Plan would require an amendment to the ORSA Plan subject to SEC approval.

        As mentioned above, the NYSE and the NASD merged their member firm regulation areas to form FINRA in July 2007. Although this merger will not have any direct impact on CBOE's regulatory efforts at this time, because this merger was strongly supported by the SEC, it does give an indication that the SEC may seek further consolidation of regulatory efforts in the future.

        In order to ensure market integrity, we engage as an SRO in extensive regulation and monitoring of our members and of trading activities. We believe our exchange is an efficient regulator, which is vital to attracting and retaining the confidence and participation of market makers, broker-dealers and institutional and retail investors.

        We expend considerable time, financial resources and effort to ensure that our internal rules and regulations conform to regulatory "best practices" within the securities exchange industry and within the regulatory regime overseen by the SEC, our primary regulator. In order to support our efforts and those of our market participants to comply with applicable law and our own exchange rules, we have developed our own automated market surveillance systems to monitor market activity on our exchange.

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        We operate the surveillance systems and are responsible for conducting all aspects of the daily surveillance of trading and market activities, including among other things, monitoring trading on the exchange, reviewing trading alerts and reports and conducting investigations into potential violations of our Rules and federal securities laws. Our automated system produces alerts established by pre-defined criteria and ad hoc reports. These alerts and reports are analyzed by the staff of our Department of Market Regulation, whose primary function is to review market surveillance data. Our Department of Regulated Entities fulfills the CBOE's regulatory and surveillance responsibilities under the ORSA Plan and regulates the activities of the CBSX. We also open investigations based on customer complaints and the findings of financial examinations of our members. Our Department of Member Firm Regulation is responsible primarily for examining our members for compliance with financial obligations, books and records rules, and various other CBOE Rules and federal securities law.

        As part of the self-regulatory process, disciplinary matters, other than minor matters covered by our Minor Rule Violation Plan, are reviewed by our Business Conduct Committee, which includes both members and public representatives. Due to our status as an SRO, we have a statutory duty to allocate the necessary resources to these functions, and this may limit our ability to dedicate funds and human resources in other areas.

        We are also a participant in the Intermarket Surveillance Group, or ISG. The ISG is an information-sharing cooperative governed by a written agreement. The purpose of the ISG is to provide a framework for the sharing of information and the coordination of regulatory efforts among exchanges trading securities and related products to address potential intermarket manipulations and trading abuses.

        In recent years, there has been increasing public and SEC scrutiny of the issue of self-regulation by SROs. In particular, some commenters have asked whether the regulatory function of SROs should be separated from the business function. In November 2004, the SEC issued a concept release examining the efficacy of self-regulation in SROs. See "—Recent Regulatory Developments" below. We cannot predict whether the SEC will take any action with respect to self-regulation by SROs and what effect, if any, such action would have on us. The SEC staff has also expressed concern about potential conflicts of interest of for-profit exchanges in performing the regulatory functions of SROs, such as the payment of dividends from regulatory fees and from fines received from an SRO's members.

        We are a participating exchange in OPRA. The OPRA Plan, which has been approved by the SEC, provides that any securities exchange approved by the SEC for the trading of securities options may become a participant exchange of OPRA. The Plan sets forth a system for reporting options information that is administered by the participant exchanges through OPRA, a committee consisting of representatives of the participant exchanges. OPRA is the designated securities information processor for market information that is generated through the trading of exchange-listed securities options in the U.S., and it disseminates certain core trading information, such as last sale reports and quotations. We also participate in the Consolidated Tape Association, or CTA, the Consolidated Quotation Plan, or CQ Plan, and the Nasdaq Unlisted Trading Privileges Plan, which perform analogous services for the U.S. equities markets. The Securities Industry Automation Corporation, or SIAC, acts as the "processor" for OPRA, CTA and the CQ Plan. The NYSE owns SIAC. The Nasdaq acts as the processor for the Nasdaq Unlisted Trading Plan.

        The SEC approved the Options Intermarket Linkage Plan, or Linkage Plan, in 2000. The Linkage Plan is designed to facilitate the routing of orders between exchanges in furtherance of a national market system. One of the principal purposes of a national market system is to assure that brokers may

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execute investors' orders at the best market price. The Linkage Plan generally is designed to enable the options exchanges and their members to avoid executing a trade at a price inferior to the best price displayed by any of the options exchanges, referred to as a "trade-through," by providing exchange market-makers with electronic access to the automatic execution systems of the away options markets.

        The options exchanges, through the Intermarket Linkage Committee, are developing a new linkage plan, expected to launch in 2009, that would replace the existing linkage plan. Under the new plan, direct exchange-to-exchange access through broker-dealers would be used to transmit intermarket sweep orders similar to sweep orders that are available in the stock market under Regulation NMS (described below under the heading "—Recent Regulatory Developments—Regulation NMS").

        We are a party to the Options Listing Procedures Plan, which sets forth the procedures that the options exchanges must follow to list new options. We are also a party to the National Market System Plan for the selection and reservation of securities symbols.

Recent Regulatory Developments

        In February 2004, the SEC published a concept release regarding the market structure for the options market. The SEC sought comment on whether it should take any action to improve the efficiency of the options markets and to mitigate the possible conflicts of interest that may be impeding price competition among those markets. In particular, the SEC focused on concerns related to payment for order flow, specialist guarantees, internalization and preferencing.

        "Payment for order flow" began when some market makers started to pay order entry providers for their customer orders. Under a typical payment for order flow arrangement with a market maker, the market maker offers an order entry provider cash or other economic incentives to route its customer orders to that market maker's designated exchange because the market maker expects that it will be able to trade with a portion of all incoming orders, including those from firms with which it has made arrangements to pay for order flow. Exchanges administer collective payment for order flow programs, under which the exchanges impose a marketing fee on market makers for some or all customer transactions, creating a pool of money for use by DPMs and preferred market makers to pay for order flow.

        While those firms accepting payment for order flow assert that investors benefit from these types of programs in the form of lower transaction costs, the SEC does not require firms to pass these payments on to their customers. Critics of these programs have argued that, because the programs ensure order flow, market makers will not quote as aggressively to attract order flow. Critics also contend that the costs incurred by market makers supporting payment for order flow adversely affects the competitiveness of those market makers' quotes because quoting strategies must generally take into account expenses such as transaction fees and other costs. Payment for order flow programs have also been subject to the criticism that they create a conflict for SROs.

        The SEC sought comment on whether it should ban the practice of payment for order flow entirely or only should ban exchange-administered programs and whether it should permit market makers to petition to be exempt from paying into exchange-administered programs. In our comment letter to the SEC on the concept release, we explicitly stated that we are opposed to all forms of payment for order flow and recommended that the SEC ban all payment for order flow programs. Nonetheless, we have stated that, as long as payment for order flow is permitted, in order to remain competitive we too need the ability to have an exchange-administered marketing fee program to

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facilitate payment for order flow. It is not clear at this point what, if any, action the SEC will take with respect to payment for order flow.

        Most options exchanges, including the CBOE, have rules that guarantee qualifying market makers a portion of each type of trade when that market maker's quote is equal to the best price on the exchange. These "specialist guarantees" reward market-making firms willing to perform the obligations of a specialist by ensuring that they will be able to interact as principal with a certain percentage of incoming orders when the specialist is already quoting at the best price at the time the order arrives. In addition, we and other exchanges have introduced "preferencing," which allows order entry firms to direct order flow to certain market makers when they are quoting at the NBBO. Preferencing provides an enhanced allocation to those preferred market makers in order to reward them for attracting order flow to the exchange. Preferencing may also increase the opportunity for some order flow providers to internalize their order flow as well as encourage payment for order flow arrangements on our exchange or on other options exchanges. The SEC is concerned that participation rights affect quote competition and has asked for comment on the subject, including the effect of "removing" the guaranteed percentage of the order from the auction process. We do not believe that participation rights have degraded quote competition on the CBOE. We cannot predict what action, if any, the SEC may take with respect to participation rights, or whether any action by the SEC will have an effect on our business.

        Internalization of order flow refers to the concept of a broker-dealer trading as a principal to fill its own customers' orders. Our Rules, like those of other options exchanges, permit a broker-dealer to trade with its own customer's orders but only after an auction or exposure period in which other members have an opportunity to participate in the trade at the proposed price or at an improved price. In addition, the SEC has historically limited options internalization participation rights, which ensure that the broker-dealer will be able to interact as principal with a certain percentage of its own customer's order in certain conditions, to large orders (i.e., 50 or more contracts). However, the SEC has approved rules of exchanges (including the CBOE) to allow internalization participation rights for option orders of any size, as long as the member guarantees that the order being internalized receives a price at least a penny better than the NBBO or, in some circumstances, a price that is at least as good as the NBBO.

        Internalization has been criticized as adversely affecting quote competition and creating a conflict between an exchange's desire to profit and its obligation to ensure that its members fulfill their best execution duties. As a result, in February 2004, the SEC sought comment with respect to what action, if any, it should take with respect to internalization of order flow. While we believe that most concerns regarding internalization for large orders are lessened by the fact that the transaction occurs on an exchange after exposure, we cannot predict what action the SEC may take with respect to internalization or whether any SEC action might have an effect on the options exchange business, including our business.

        In 2007, the SEC implemented Regulation NMS, which addresses order protection, intermarket access, sub-penny pricing and market data. While Regulation NMS specifically covers the equities marketplace and does not apply to the options exchanges, it serves as a further example of SEC interest in market oversight issues. CBSX, the CBOE's stock trading facility, is compliant with Regulation NMS.

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        At the instigation of the SEC, the CBOE and the other options exchanges commenced a Penny Pilot Program early in 2007 in 13 option classes. The Penny Pilot Program subsequently was expanded in September 2007 with the addition of 22 option classes, and again in late March 2008, with the addition of 28 option classes. Currently, 58 option classes are participating in the Penny Pilot Program, and they are among the most actively-traded option classes, representing approximately 53% of the national volume. Under the Penny Pilot, these options classes generally are quoted in penny and nickel increments, as opposed to the five and ten cent increments allowed under existing rules. The SEC has expressed the view that quoting in pennies benefits investors in two ways: (1) penny increments allow for a narrower bid/ask spread and (2) the pricing pressure reduces the role of payment for order flow in options.

        In its reports to the SEC analyzing the Penny Pilot, the CBOE has expressed that, while narrowing spreads, the Penny Pilot is causing other unintended and potentially harmful consequences for the options industry, including the possible negative impact of penny increments on system capacity as a result of increased quote traffic. Liquidity at the best bid or offer and volume in some classes has decreased, and quote traffic has increased dramatically. As a result, the CBOE has proposed to the SEC certain changes to the Penny Pilot Program, including changing the "breakpoint" from $3 to $1 at which options are quoted and traded in penny increments. No action has been taken yet on this proposal. The CBOE intends to continue monitoring the impact of the Penny Pilot, and the CBOE cannot predict what the net impact of the Penny Pilot will be. If the Penny Pilot is successful in achieving the projected benefits and the impact on quote traffic is acceptable, then we expect quoting and trading in penny increments to be expanded to additional options classes, and potentially to all options classes.

        As indicated above, options with their multiple series for each options class, when combined with the multiple quoters inherent in the market model of the CBOE and other options exchanges, result in massive amounts of quote traffic from each exchange being funneled into OPRA and then disseminated to market data vendors. While the exchanges and OPRA have continued to add capacity to handle this information flow, the resources needed to take in and re-disseminate the data have posed a burden on market data vendors.

        As a result of the potential impact of penny quoting on options quote traffic, the SEC has required that each options exchange adopt quote mitigation measures in conjunction with their rules for penny quoting. The CBOE has implemented several quote mitigation strategies, including modifications to market maker quoting obligations, charges for excessive quoting, delisting of less active equity option classes, and limiting the number of messages sent by members who access the CBOE electronically. It is obviously difficult to quantify the impact of these quote mitigation measures and assess their effectiveness. However, the CBOE believes that its efforts have been effective in mitigating quotations and does not believe the strategies have had a negative impact on the CBOE's marketplace.

        In 2007, a notable change to options market structure was the expansion of "portfolio margining." The SEC approved portfolio margining for broad-based index options in July 2005. In the past, portfolio margining was available only to market professionals. The SEC approved the CBOE and NYSE rules that allow for expanded portfolio margining for customer accounts effective April 2, 2007. Subsequently, the NASD also adopted portfolio margining rules. The scope of portfolio margining was expanded to include equities, equity options, narrow-based index options and certain securities futures

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products such as single stock futures. U.S. futures markets and most European and Asian exchanges have employed risk-based margining similar to these new rules for many years.

        The portfolio margining rules have the effect of aligning the amount of margin money required to be held in a customer's account with the risk of the portfolio as a whole. The risk is calculated through simulation of market moves while accounting for offsets among products held in the account that are based on the same underlying economic exposure. Portfolio margining can significantly reduce margin requirements by examining the combined risk of a portfolio of financial instruments instead of margining each instrument separately. Portfolio margining makes trading more efficient by freeing up margin capital for other purposes.

        In July 2007, the regulatory functions of the NYSE and NASD were consolidated to form FINRA. As of December 2008, the CBOE and FINRA have altogether approved 20 broker-dealers to offer portfolio margining. With the market volatility experienced during the period September 2008 through March 2009, portfolio margining has functioned reliably and without any unusual consequences.

        The SEC recently took a number of actions meant to address concerns regarding short sales in the light of the ongoing credit crisis. These actions included, but were not limited to, an SEC emergency order (effective September 19, 2008, and terminating on October 2, 2008) that prohibited short selling in certain financial stocks. The order was extended on October 2, 2008 and terminated on October 8, 2008.

        Another SEC emergency order (effective September 18, 2008 and terminating on October 1, 2008) imposed, among other things, a requirement found in Temporary Rule 204T to close out a fail to deliver position at a registered clearing agency in an equity security for a long or short sale transaction in that equity security by no later than the beginning of regular trading hours on the first settlement day following the settlement date, subject to certain exceptions. This requirement applied to all equity securities, with no exception for options market makers. Subsequently, the SEC staff issued interpretive guidance that, among other things, permitted a fail to deliver position that is attributable to bona fide market making activities by certain market makers, including options market makers, to be closed out by no later than the beginning of regular trading hours on the third settlement day (as opposed to the first settlement day) following the settlement date, subject to certain requirements. The order was extended on October 1, 2008, with the extension set to terminate on October 17, 2008. However, on October 14, 2008, Rule 204T was extended on a temporary basis, with some modifications to address operational and technical concerns, until July 31, 2009. The SEC sought comments on the operation of the rule and whether to make it permanent. Effective on July 31, 2009, the SEC made permanent the rule, with some modifications to address commenters' concerns.

        On April 8, 2009, the SEC voted unanimously to seek public comment on whether short sale price restrictions or circuit breaker restrictions should be imposed and whether such measures would help promote market stability and restore investor confidence. (In June 2007, the SEC voted to eliminate price restrictions.) The SEC decided to re-evaluate the issue due to extreme market conditions and the resulting deterioration in investor confidence. The SEC has proposed two approaches to restrictions on short selling. One would apply on a market-wide and permanent basis, while the other would apply only to a particular security during severe market declines in that security. The first approach consists of two market-wide proposals: (i) a market-wide short sale price test based on the national best bid (the proposed modified uptick rule); or (ii) a market-wide short sale price test based on the last sale price or tick (the proposed uptick rule). The second approach consists of three circuit breaker proposals: (i) a ban short selling in a particular security for the remainder of the day if there is a severe decline in price in that security (the proposed circuit breaker halt rule); (ii) the imposition of a short sale price test based on the national best bid in a particular security for the remainder of the day

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if there is a severe decline in price in that security (the proposed circuit breaker modified uptick rule), or (iii) the imposition of a short sale price test based on the last sale price in a particular security for the remainder of the day if there is a severe decline in price in that security (the proposed circuit breaker uptick rule). Certain of these proposals do not contain exceptions for options market makers that may enter short sales in underlying securities in connection with bona fide option market making and hedging activities. Consequently, if such a proposal were adopted, it could affect the ability of options market makers to conduct their business on the CBOE. In addition, the SEC has proposed amendments to Regulation SHO to require that a broker-dealer mark a sell order "short exempt" if the seller were to rely on an exception to a short sale price test restriction or a circuit breaker rule, if adopted. Comments on these proposals were due June 19, 2009.

        On July 27, 2009, the SEC announced that it intends to hold a public roundtable on September 30, 2009 to discuss securities lending, pre-borrowing and possible additional short sale disclosures.

"Flash Orders"

        More recently, the SEC has stated its intentions to examine the impact of "flash orders" on the price discovery process in securities markets. Orders that get flashed on exchanges are orders that are marketable but cannot be executed on the receiving exchange at that exchange's disseminated price because another exchange is displaying a better price. Flashing an order gives participants on the receiving exchange an opportunity to match the better price available on another exchange before a linkage order is routed to such other exchange.

        We cannot predict what action the SEC may take with respect to flash orders or what effect any SEC action might have on the options exchange business, including our business.

Regulation of the U.S. Futures Exchange Industry

        The operations of our wholly-owned subsidiary, CFE, are subject to regulation by the CFTC under the Commodity Exchange Act. The Commodity Exchange Act generally requires that futures trading in the United States be conducted on a commodity exchange designated as a contract market by the CFTC under the Commodity Exchange Act. The Commodity Exchange Act and CFTC regulations establish non-financial criteria for an exchange to be designated as a contract market on which futures and futures options contracts may be traded. Designation as a contract market for the trading of a specified futures contract is non-exclusive. This means that the CFTC may designate additional exchanges as contract markets for trading the same or similar contracts.

        CFE is an SRO that is subject to the oversight of the CFTC and to a variety of ongoing regulatory and reporting responsibilities under the Commodity Exchange Act. CFE has surveillance and compliance operations and procedures to monitor and enforce compliance with rules pertaining to the trading, position sizes, delivery obligations and financial condition of trading privilege holders.

        As of April 11, 2006, the National Futures Association, or NFA, is performing most of these functions pursuant to a Regulatory Services Agreement with CFE. CFE retains overall responsibility for the regulation of its marketplace. CFE also remains responsible for bringing disciplinary actions against trading privilege holders, including the ability to issue fines in the case of serious rule violations. In the case of financially distressed trading privilege holders, CFE may take various emergency actions to protect customers, other trading privilege holders and CFE.

        On April 27, 2009, the CFTC adopted Acceptable Practices that provide futures exchanges with a safe harbor for compliance with the requirement under Section 5(d)(15) of the Commodity Exchange Act that they minimize conflicts of interest in their decision making. The Acceptable Practices have the following general components. First, the Board Composition Acceptable Practice provides that futures exchanges minimize potential conflicts of interest by maintaining governing boards composed of at least

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thirty-five percent public directors. Second, the Regulatory Oversight Committee Acceptable Practice provides that futures exchanges establish a board-level Regulatory Oversight Committee, composed solely of public directors, to oversee regulatory functions. Third, the Disciplinary Panel Acceptable Practice provides that each disciplinary panel at all futures exchanges include at least one public participant, and that no panel be dominated by any group or class of futures exchange members. Finally, the Acceptable Practices provide a definition of "public director" and a portion of that definition is also applicable with respect to public participants on futures exchange disciplinary panels. Futures exchanges must implement the Acceptable Practices, or otherwise demonstrate full compliance with Section 5(d)(15), by April 27, 2010. The Acceptable Practices will result in changes in the manner in which CFE conducts business and governs itself. We are presently evaluating the impact of the adoption of the Acceptable Practices and cannot predict or estimate the full extent to which the Acceptable Practices may affect CFE or its operations or the amount of the additional costs CFE may incur in implementing them or the timing of such costs.

Legislative Changes in Response to Credit Crisis and Other Events

        In light of the credit crisis and its impact on financial institutions, the recent market declines that have occurred, and the overall state of the economy, significant changes to the oversight of financial institutions currently are being discussed. It is possible that some of these changes may impact the oversight of the CBOE. Given the current uncertainty regarding the form that these changes may take, it is not possible at this point in time to predict what impact, if any, these changes may have on the CBOE.

Legislative Changes Related to Tax Treatment of Options Market Makers

        In May 2009, the Obama Administration proposed to change the existing tax treatment for futures traders and options market participants, particularly options market makers. The proposal calls for repeal of the "60/40 Rule," which allows market makers to pay a blend of capital gains and ordinary tax rates on their income. Under that blended rate, 60 cents of each dollar earned by an options dealer is taxed at the 15-percent capital gains rate while the remaining 40 cents is taxed at ordinary income rates. The top rate on ordinary income currently is 35 percent, but the Obama Administration is proposing to increase that rate to 39.6 percent. If the "60/40 Rule" were repealed in the manner proposed by the Obama Administration, it could affect the ability of CBOE users, and particularly CBOE market makers, to conduct business on the CBOE.

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DIRECTORS AND MANAGEMENT OF THE CBOE AND CBOE HOLDINGS AFTER THE
RESTRUCTURING TRANSACTION

Directors of the CBOE and CBOE Holdings after the Restructuring Transaction

        CBOE Holdings Board of Directors.    Following the restructuring transaction, the CBOE Holdings board of directors will consist of 23 directors, one of whom will be CBOE Holdings' chief executive officer. At all times no less than two-thirds of the directors of CBOE Holdings will be independent as defined by CBOE Holdings' board of directors, which definition will satisfy the NYSE's or the NASDAQ Stock Market's listing standards for independence. Each CBOE Holdings director will serve for a one-year term or until his or her successor is elected and qualified. There is no limit on the number of terms a director may serve on either board.

        CBOE Board of Directors.    The CBOE's board of directors also will consist of 23 directors, one of whom will be the CBOE's chief executive officer, at least a majority of whom will be non-industry directors and the remainder of whom will be industry directors.

        In the CBOE Bylaws, a "non-industry director" is defined as a director who is not an industry director.

        An "industry director" is any director who (i) is a holder of a CBOE trading permit or otherwise subject to regulation by the CBOE; (ii) is a broker-dealer or an officer, director or employee of a broker-dealer or has been in any such capacity within the prior three years; (iii) is, or was within the prior three years, associated with an entity that is affiliated with a broker-dealer whose revenues account for a material portion of the consolidated revenues of the entities with which the broker-dealer is affiliated; (iv) has a material ownership interest in a broker-dealer and has investments in broker-dealers that account for a material portion of the director's net worth; (v) has a consulting or employment relationship with or has provided professional services to the CBOE or any of its affiliates or has had such a relationship or has provided such services within the prior three years; or (vi) provides, or has provided within the prior three years, professional or consulting services to a broker-dealer, or to an entity with a 50% or greater ownership interest in a broker-dealer whose revenues account for a material portion of the consolidated revenues of the entities with which the broker-dealer is affiliated, and the revenue from all such professional or consulting services accounts for a material portion of either the revenues received by the director or the revenues received by the director's firm or partnership.

        Notwithstanding the foregoing, a director shall not be deemed to be an "industry director" solely because either (A) the director is or was within the prior three years an outside director of a broker-dealer or an outside director of an entity that is affiliated with a broker-dealer, provided that the broker-dealer is not a holder of a CBOE trading permit or otherwise subject to regulation by the CBOE, or (B) the director is or was within the prior three years associated with an entity that is affiliated with a broker-dealer whose revenues do not account for a material portion of the consolidated revenues of the entities with which the broker-dealer is affiliated, provided that the broker-dealer is not a holder of a CBOE trading permit or otherwise subject to regulation by the CBOE. At all times at least one non-industry director shall be a non-industry director exclusive of the exceptions provided for in the preceding sentence and shall have no material business relationship with a broker or dealer or the CBOE or any of its affiliates. In this context, an "outside director" is defined as a director of an entity who is not an employee or officer (or any person occupying a similar status or performing similar functions) of that entity.

        The number of non-industry directors and industry directors may be increased from time to time by resolution adopted by the board of directors of the CBOE but in no event shall the number of industry directors constitute less than 30% of the members of the board and in no event shall the number of non-industry directors constitute less than a majority of the members of the board. In

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addition, at all times at least 20% of directors serving on the board shall be industry directors nominated by the Industry-Director Subcommittee (or otherwise through the petition process discussed below) as provided in the CBOE Bylaws. Of the industry directors on the CBOE board, at least two will represent entities that are significantly engaged in conducting a securities business with public customers. Each of the CBOE directors will serve for a one-year term or until his or her successor is elected and qualified. There is no limit on the number of terms a director may serve on either board.

        Initial Members of the CBOE and CBOE Holdings Boards of Directors.    Although the requirements for the two boards are different, the initial boards of directors of CBOE Holdings and the CBOE immediately following the restructuring transaction will consist of the same directors. Under CBOE Holdings independence standards, it is possible that an individual serving as an industry director at the CBOE may nonetheless qualify as an independent director at CBOE Holdings. It is intended that each of the directors selected to serve on the initial boards of directors following the restructuring transaction will be directors serving on the board of directors of the CBOE immediately prior to the restructuring transaction. While it is currently intended that the two initial boards will consist of the same members, there is no requirement for that to remain the case.

Committees of the CBOE Holdings Board of Directors

        Upon completion of the restructuring transaction, the CBOE Holdings board of directors will initially have the following four board committees:

        Each of these committees, other than the Executive Committee and the Finance Committee, will comply with the independence requirements of CBOE Holdings, which requirements will satisfy the independence requirements as defined in the listing standards of the NYSE or the NASDAQ Stock Market. For a description of the CBOE's current independence standards for directors, see "Director Independence."

        Audit Committee.    The Audit Committee will consist of at least three directors, all of whom must be independent directors and all of whom shall be recommended by the Nominating and Governance Committee for approval by the board of directors. The members of the Audit Committee are                        , who will chair the committee, and                        and                         . The Audit Committee consists exclusively of directors who are financially literate. In addition,                         will be considered audit committee financial expert(s) as defined by the SEC.

        The Audit Committee responsibilities will include:

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        Compensation Committee.    The Compensation Committee will consist of at least three directors, all of whom must be independent directors, and all of whom shall be recommended by the Nominating and Governance Committee for approval by the board of directors. At all times at least one director on the Compensation Committee must be the beneficial owner of, or be affiliated with the beneficial owner of, stock of CBOE Holdings. The members of the Compensation Committee are                        , who will chair the committee, and                         and                         . The committee will have primary responsibility for:

        Executive Committee.    The Executive Committee will include the Chairman of the Board, the Chief Executive Officer (if a director), the Lead Director, if any, and such other number of directors that the board deems appropriate, provided that at all times the majority of the directors serving on the Executive Committee must be independent directors. Members of the Executive Committee (other than those specified) shall be recommended by the Nominating and Governance Committee for approval by the board of directors. The members of the Executive Committee are director                        , who will chair the committee, and                        ,                         and                         . The committee will have primary responsibility for meeting and taking action at such times as action is required between regularly scheduled meetings of the full board of directors.

        Nominating and Governance Committee.    The Nominating and Governance Committee will consist of at least five directors, all of whom must be independent directors, and all of whom shall be approved by the board of directors. The members of the Nominating and Governance Committee are                        , who will chair the committee, and directors                        ,                         ,                         ,                         

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,                        and                         . The Nominating and Governance Committee's responsibilities will include:

        The Nominating and Governance Committee will consider stockholder recommendations for candidates for the CBOE Holdings board of directors.

        The CBOE Holdings bylaws provide that, in order for a stockholder's nomination of a candidate for the board to be properly brought before the an annual meeting of the stockholders, the stockholder's nomination must be delivered to the Secretary, CBOE Holdings, Inc., 400 South LaSalle Street, Chicago, Illinois 60605 no earlier than 120 days prior to the one year anniversary date of the prior year's annual meeting and no later than 90 days prior to the one year anniversary date of the prior year's annual meeting.

        Finance Committee.    The Finance Committee will consist of at three directors, all of whom shall be approved by the board of directors. The members of the Finance Committee are                        , who will chair the committee, and directors                        and                         . The Finance Committee's responsibilities will include:

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Committees of the CBOE Board of Directors

        It is currently intended that following the restructuring transaction, the Audit Committee, Compensation Committee, Executive Committee and the Nominating and Governance Committee of CBOE Holdings and the CBOE will consist of the same members, and each committee will perform the same functions at the CBOE as it does at CBOE Holdings.

        At the CBOE, the Executive Committee is required to include the Vice Chairman and at least one Representative Director (as described below) in addition to the Chairman of the Board, the Chief Executive Officer (if a director) and the Lead Director, if any, and to be composed of a majority of non-industry directors. The CBOE Audit Committee and CBOE Compensation Committee must be composed solely of non-industry directors, and the CBOE Nominating and Governance Committee must be composed of a majority of non-industry directors.

        In addition to these committees, the CBOE will have a Regulatory Oversight Committee and a Trading Advisory Committee.

        Nominating and Governance.    At the CBOE, all candidates for election as director of the CBOE must be nominated by the Nominating and Governance Committee.

        Industry directors representing at least 20% of the total number of directors serving on the board of directors of the CBOE shall be recommended by the Industry-Director Subcommittee of the Nominating and Governance Committee, provided that if 20% of the directors then serving on the board is not a whole number, such number of directors to be selected by the Industry-Director Subcommittee shall be rounded up to the next whole number. We refer to these directors as the "Representative Directors." Those industry directors not recommended by the Industry-Director Subcommittee shall be nominated by the Nominating and Governance Committee. The Industry-Director Subcommittee shall consist of all of the industry directors then serving on the Nominating and Governance Committee. If Representative Director nominees are opposed by a petition candidate, then the Nominating and Governance Committee shall be bound to accept and nominate the Representative Director nominees who receive the most votes pursuant to the run-off election process set forth in the Bylaws of the CBOE. The CBOE and CBOE Holdings will also enter into a Voting Agreement pursuant to which CBOE Holdings will agree to vote in favor of the Representative Directors nominated by the Nominating and Governance Committee.

        In any given year, holders of Trading Permits may nominate alternative candidates for election to the Representative Director positions to be elected in a given year by submitting a petition signed by individuals representing not less than 10% of the total outstanding Trading Permits at that time. If one or more valid petitions are received, the Secretary shall issue a circular to all of the Trading Permit Holders identifying those individuals nominated for Representative Director by the Industry-Director Subcommittee and those individuals nominated for Representative Director through the petition process as well as of the time and date of a run-off election to determine which individuals will be nominated as Representative Director(s) by the Nominating and Governance Committee (the "Run-off Election"). In any Run-off Election, each holder of a Trading Permit shall have one vote with respect to each Trading Permit held by such Trading Permit Holder for each Representative Director position to be filled that year; provided, however, that no holder of Trading Permits, either alone or together with its affiliates, may account for more than 20% of the votes cast for a candidate, and any votes cast by a holder of Trading Permits, either alone or together with its affiliates, in excess of this 20% limitation shall be disregarded. The number of individual Representative Director nominees equal to

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the number of Representative Director positions to be filled that year receiving the largest number of votes in the Run-off Election (after taking into account the voting limitation set forth herein) will be the persons approved by the Trading Permit Holders to be nominated as the Representative Director(s) by the Nominating and Governance Committee for that year.

        Regulatory Oversight Committee.    The Regulatory Oversight Committee will be a committee of the CBOE that will consist of at least three directors, all of whom shall be non-industry directors and all of whom shall be recommended by the non-industry directors on the Nominating and Governance Committee for approval by the Board of Directors. The expected members of the Regulatory Oversight Committee following the restructuring transaction will be                        , who will chair the committee, and directors                         ,                         and                         . The Regulatory Oversight Committee's responsibilities will include:

        Trading Advisory Committee.    The Trading Advisory Committee shall advise the Office of the Chairman regarding matters of interest to trading permit holders. It shall consist of such number of committee members as set by the board of directors from time to time. The majority of the members of the Trading Advisory Committee shall be individuals involved in trading either directly or through their firms. The Vice Chairman shall be the Chairman of the Trading Advisory Committee and shall recommend to the board who the other committee members should be.

Directors and Executive Officers

        Set forth below are the names, ages and positions of the persons currently serving as directors and executive officers of each of CBOE Holdings and the CBOE. As stated above, immediately following the completion of the restructuring transaction, the boards of directors of both CBOE Holdings and the CBOE will consist of the same individuals, all of whom will have been members of the board of directors of the CBOE immediately prior to the completion of the restructuring transaction. The CBOE board of directors has appointed a board committee consisting of the Lead Director, a member of the Floor Directors Committee and the chairpersons of the CBOE's Audit, Compensation, Executive, Governance and Regulatory Oversight Committees to recommend to the CBOE Holdings Nominating and Governance Committee directors to serve on the committees of the board of CBOE Holdings.

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CBOE Holdings Executives

Name
  Age
  Position

William J. Brodsky   65   President and Chief Executive Officer
Richard G. DuFour   66   Vice President
Joanne-Moffic-Silver   57   Vice President and Secretary
Alan J. Dean   54   Vice President and Treasurer

CBOE Executives

Name
  Age
  Position

William J. Brodsky   65   Chairman and Chief Executive Officer
Edward J. Joyce   57   President and Chief Operating Officer
Edward T. Tilly   45   Executive Vice Chairman
Bradley G. Griffith   53   Vice Chairman*
Alan J. Dean   54   Executive Vice President and Chief Financial Officer
Richard G. DuFour   66   Executive Vice President
Joanne Moffic-Silver   57   Executive Vice President,
General Counsel and Corporate Secretary
Gerald T. O'Connell   57   Executive Vice President
Edward L. Provost   56   Executive Vice President
Phillip M. Slocum   57   Executive Vice President
Timothy H. Thompson   46   Senior Vice President and Chief Regulatory Officer
Patrick J. Fay   49   Senior Vice President for Member and Regulatory Services

CBOE Holdings and CBOE Directors

Name
  Age
  Position

Robert J. Birnbaum   81   Director
William J. Brodsky   65   Director
James R. Boris   64   Director
Mark F. Duffy   59   Director
David A. Fisher   40   Director
Janet P. Froetscher   49   Director
Bradley G. Griffith   53   Director
Paul Kepes   41   Director
Stuart J. Kipnes   43   Director
Duane R. Kullberg   76   Director
Benjamin R. Londergan   33   Director
R. Eden Martin   69   Director
Anthony D. McCormick   56   Director
Kevin Murphy   48   Director
Roderick Palmore   57   Director
Susan M. Phillips   64   Director
William R. Power   64   Director
Samuel K. Skinner   71   Director
John E. Smollen   49   Director
Carole Stone   62   Director
Howard L. Stone   74   Director
Eugene S. Sunshine   59   Director
Jonathan Werts   39   Director

*
Effective as of July 24, 2009, Mr. Griffith was on a leave of absence as Vice Chairman.

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        Set forth below is biographical information about each of the individuals named in the tables above:

        William J. Brodsky.    Mr. Brodsky is Chairman and Chief Executive Officer of the CBOE. He has served in that capacity since 1997. Prior to joining the CBOE in 1997, Mr. Brodsky was president and chief executive officer of the Chicago Mercantile Exchange from 1985 to 1997. Mr. Brodsky is a director of Integrys Energy Group, OneChicago, LLC and the CBOE Futures Exchange. He also is Chairman of the World Federation of Exchanges, past chairman of the International Options Markets Association and a director of the Swiss Futures and Options Association. He is a member of the Federal Reserve Bank of New York's International Advisory Committee. Mr. Brodsky also serves on the Kellogg School of Management Advisory Council and as a trustee of Syracuse University. He is a member of the board of trustees of Northwestern Memorial Hospital. Mr. Brodsky holds an A.B. degree and a J.D. degree from Syracuse University and is a member of the bar in Illinois and New York.

        Edward J. Joyce.    Mr. Joyce is President and Chief Operating Officer of the CBOE. He has served in that capacity since 2000. Mr. Joyce has been employed at the CBOE in various capacities since 1974. Mr. Joyce serves on the board of directors of The Options Clearing Corporation and the CBOE Futures Exchange. He holds a B.S. degree in Business Administration from Illinois State University and an M.B.A. from DePaul University.

        Edward T. Tilly.    Mr. Tilly is Executive Vice Chairman of the CBOE. He has served in that capacity since August 2006. He was a member of the CBOE from 1989 until 2006, and served as Member Vice Chairman of the CBOE from 2004 through July 2006. Mr. Tilly serves on the board of directors of the CBOE Stock Exchange. He holds a B.A. degree in Economics from Northwestern University.

        Bradley G. Griffith.    Mr. Griffith has been a member of the CBOE since 1980 and its Member Vice-Chairman for 2007, 2008 and 2009. Mr. Griffith is currently on a leave of absence as Vice Chairman. Mr. Griffith served on the board of directors of the CBOE Stock Exchange until his leave of absence as the CBOE's Vice Chairman in July 2009. He is also a member of Edge Capture, LLC, a proprietary software provider. Mr. Griffith is the co-founder of the Tiffani Kim Institute, the country's first Medi-Spa. Additionally, he owns several real estate companies that operate and manage properties in Illinois, Indiana and Michigan. Mr. Griffith holds a B.S. in Business from Indiana University.

        Alan J. Dean.    Mr. Dean is Executive Vice President and Chief Financial Officer of the CBOE. He has served in that capacity since 1988 and has been employed at the CBOE in the financial area since 1979. Mr. Dean serves on the board of directors of LifeSource. He holds a B.S. degree in Accounting from Western Illinois University and an M.B.A. from Northwestern University's Kellogg Graduate School of Management.

        Richard G. DuFour.    Mr. DuFour is Executive Vice President of Corporate Planning and Development of the CBOE. He has served in that capacity since 1999 and has been employed at the CBOE since 1980. He serves on the board of OneChicago and as treasurer of the International Options Markets Association. Mr. DuFour is a director of the Lincoln Park Renewal Corporation. Mr. DuFour holds a B.A. degree from the University of Notre Dame and an M.B.A. from the University of Michigan.

        Patrick J. Fay.    Mr. Fay is Senior Vice President of Member and Regulatory Services for CBOE. He has served in that capacity since 2006 and previously served as Managing Director of the CBOE Futures Exchange. Mr. Fay rejoined the CBOE in January 2004 from NQLX, LLC, where he served for nineteen months as executive vice president. Prior to his position at NQLX, Mr. Fay spent eighteen years at the CBOE, where he was involved in systems development, trading operations and marketing.

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He holds a B.S. in Business from Eastern Illinois University and a M.B.A. in Business Economics from DePaul University.

        Joanne-Moffic-Silver.    Ms. Moffic-Silver is Executive Vice President, General Counsel and Corporate Secretary of the CBOE. She has served in that capacity since 1997 and has been employed at the CBOE since 1980. She is currently a member of the board of advisors of Northwestern University School of Law. Ms. Moffic-Silver received her B.A. degree with high honors and was elected a member of Phi Beta Kappa from the University of Wisconsin-Madison. Ms. Moffic-Silver received her J.D. degree with honors from Northwestern University School of Law.

        Gerald T. O'Connell.    Mr. O'Connell is Executive Vice President and Chief Information Officer of the CBOE. He has served in that capacity since 1993 and has been employed at the CBOE since 1984. Mr. O'Connell serves on the board of directors of the CBOE Stock Exchange. He holds a B.S. degree in Mathematics from Lewis University and a J.D. degree from John Marshall Law.

        Edward L. Provost.    Mr. Provost is Executive Vice President of Business Development of the CBOE. He has served in that capacity since 2000 and has been employed at the CBOE since 1975. Mr. Provost serves as Chairman of the board of directors of the CBOE Stock Exchange. He holds a B.B.A. in Finance from Loyola University of Chicago and an M.B.A. from the University of Chicago Graduate School of Business.

        Philip M. Slocum.    Mr. Slocum is Executive Vice President of Trading Operations of the CBOE. He has served in that capacity since 1999 and has been employed at the CBOE since 1975. Mr. Slocum holds a B.A. degree in Psychology from Carthage College and a Master of Science in Organizational Behavior from George Williams College.

        Timothy H. Thompson.    Mr. Thompson is Senior Vice President and Chief Regulatory Officer of the CBOE. He has served in that capacity since June 2003 and served as special assistant to the CBOE's Chief Regulatory Officer during the previous year. Prior to joining the CBOE, Mr. Thompson was general counsel and chief compliance officer for Botta Capital Management, LLC. Earlier in his career, Mr. Thompson spent four years at the SEC, where he became Branch Chief in the Division of Market Regulation. Mr. Thompson received his B.S. in Finance from the University of Notre Dame and a J.D. degree from the University of Michigan Law School.

        Robert J. Birnbaum.    Mr. Birnbaum (retired) served as special counsel for Dechert Price and Rhoads from 1989 to 1994. Prior to that, he served as the president and chief operating officer of the New York Stock Exchange, Inc. from 1985 to 1988 and as president and chief operating officer of the American Stock Exchange from 1977 to 1985. Mr. Birnbaum holds a B.S. degree from New York University and a L.L.B. from Georgetown University Law School.

        James R. Boris.    Mr. Boris currently serves as CBOE's lead director. Mr. Boris is the retired chairman and chief executive officer of EVEREN Securities, Inc. and its predecessor Kemper Securities, Inc. He is a member of the boards of directors of Smurfit-Stone Container Corporation and Big Shoulders Fund. His past affiliations include membership of the board of directors of the Securities Industry Association, Integrys Energy Group, Inc., Midwest Air Group, Inc., the Chicago Stock Exchange, The Catholic Charities of the Archdiocese of Chicago, Loyola University Health System, Inc. and the Civic Federation. He has served on the board of trustees of Gannon University and Loyola University of Chicago and on advisory boards at both the Kellogg Graduate School of Management and DePaul University's College of Commerce. He holds a B.A. and M.B.A from Gannon University.

        Mark F. Duffy.    Mr. Duffy is a nominee, floor broker and market-maker of CBOE member firm V. Trader Pro, LLC, and is a managing member of the CBOE member firm Cornerstone Trading, L.L.C. In addition, he is general partner of Fugue, a CBOE member lessor organization. Mr. Duffy has been a CBOE member since 1985. Mr. Duffy served as Vice Chairman of the CBOE from 2001

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through 2003. He holds a B.A. degree in Education and a Master of Arts degree from the University of Michigan. He also holds a J. D. and L.L.M., Master of Laws in Taxation, from The John Marshall Law School.

        David A. Fisher.    Mr. Fisher is the CEO of options Xpress Holdings, Inc., an online options and stock brokerage firm. He served as the company's president since March 2007 and prior to that served as chief financial officer beginning in August 2004. From March 2001 to July 2004, he served as chief financial officer of Potbelly Sandwich Works, a quick service restaurant chain with over 60 units. Prior to that, Mr. Fisher served as chief financial officer and secretary of Prism Financial Corporation, a publicly-traded, nationwide consumer financial services company. He holds a B.S. in finance from the University of Illinois and a J.D. from Northwestern University.

        Janet P. Froetscher.    Ms. Froetscher is president and chief executive officer of the National Safety Council. Previously, she served as president and chief executive officer of the United Way of Metropolitan Chicago and in a variety of roles at the Aspen Institute, most recently as chief operating officer. From 1992 to 2000, Ms. Froetscher was the executive director of the Finance Research and Advisory Committee of the Commercial Club of Chicago. She is a member of the board of the Chicago Chamber of Commerce, and a member of the Chicago Network, Commercial Club of Chicago and Economic Club of Chicago. Ms. Froetscher holds a B.A. degree from the University of Virginia and a Masters of Management from Northwestern University's Kellogg Graduate School of Management. Ms. Froetscher is also a Henry Crown Fellow of the Aspen Institute.

        Paul Kepes.    Mr. Kepes is a senior partner and managing director of Chicago Trading Company (CTC). Founded in 1995, CTC is a leading proprietary derivatives trading firm active in various options and futures markets, including equity indices, equities, interest rates and energies. The firm trades both on-floor and electronically utilizing sophisticated proprietary pricing and risk management systems. CTC serves in a specialist capacity on various exchanges in many of the most active index, ETF and interest rate products. CTC employs over 300 people and is based in Chicago with offices in New York and London. Mr. Kepes holds a B.S. degree in aeronautical and astronautical engineering from the University of Illinois.

        Stuart J. Kipnes.    Mr. Kipnes is the president and sole shareholder of Associated Options, Inc., an options brokerage firm that operates on the CBOE trading floor. He has served in that capacity since 1995. Mr. Kipnes holds a B.S. degree in Finance from the University of Maryland.

        Duane R. Kullberg.    Mr. Kullberg served as managing partner and chief executive officer of Arthur Andersen & Co., S.C. from 1980 until 1989. Mr. Kullberg is a member of the National Association of Corporate Directors and has served on a number of private and public company boards. He currently serves as a life trustee of Northwestern University, the University of Minnesota Foundation, and the Art Institute of Chicago. He is a member of the Commercial Club of Chicago. Mr. Kullberg holds a B.B.A. degree from the University of Minnesota.

        Benjamin R. Londergan.    Mr. Londergan is co-CEO of Group One and has served on their board of directors since January 2005. Prior to his current role, he was derivatives trading managing director and was directly responsible for opening and managing Group One Trading, LP's first European trading operation, G1 Derivatives Trading LTD. Mr. Londergan began his career at Group One Trading, L.P. in 1998. Mr. Londergan holds a B.A. degree in Mathematics from Indiana University with minors in French and Economics.

        R. Eden Martin.    Mr. Martin is of counsel at the law firm Sidley Austin LLP, having served as a partner from 1975 to 2004 and as chairman of the management committee from 1989 until 1999. Mr. Martin is the president of The Commercial Club of Chicago and president of its Civic Committee since 1999. Mr. Martin is a member of the boards of directors of Nicor Inc., Aon Corporation and the

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United Way of Metropolitan Chicago. He also is a trustee of Northwestern University and a life trustee of the Chicago History Museum, the Chicago Symphony Orchestra and the Ravinia Festival. Mr. Martin holds a B.A. from the University of Illinois and an L.L.B. degree from Harvard University.

        Anthony D. McCormick.    Mr. McCormick served as vice president of derivative markets for Charles Schwab & Co., Inc. from April 1998 through May 2009, and remains an advisor to Charles Schwab & Co., Inc. Previously, he spent 12 years with Harris Futures Corporation and served as its president from 1993 to 1997. He has served on the board of directors of both the Chicago Stock Exchange and the Chicago Mercantile Exchange. Mr. McCormick holds a B.A. degree from the University of Virginia and an M.B.A. from Northwestern University's Kellogg Graduate School of Management.

        Kevin L. Murphy.    Mr. Murphy is currently a managing director at Citigroup and head of U.S. option electronic execution. He was previously head of U.S. broker dealer sales which included the electronic routing and execution of both equity and derivative products for broker dealer clients. In 1991, Mr. Murphy was named head of the listed option department at Shearson Lehman Brothers, responsible for the sales and trading of listed options and overseeing all of the firm's options exchange floor operations. In 2004, he managed the OTC derivative group for high net worth clients of Smith Barney and Citigroup's private bank. In 2005, he was named co-head of Citigroup's derivative execution services and was also responsible for building out the firm's derivative DMA product. Mr. Murphy is a graduate of the University of Massachusetts.

        Roderick Palmore.    Mr. Palmore is executive vice president, general counsel and chief compliance and risk management officer of General Mills, Inc. Prior to joining General Mills in February 2008, he served as executive vice president and general counsel of Sara Lee Corporation. Mr. Palmore has also served as a member of the boards of directors of Nuveen Investments, Inc. and the United Way of Metropolitan Chicago. Mr. Palmore holds a B.A. degree in Economics from Yale University and a J.D. degree from the University of Chicago Law School.

        Susan M. Phillips.    Dr. Phillips is the dean of The George Washington University School of Business, and a professor of finance. She has served in that capacity since 1998. Previously she served as a commissioner of the CFTC from 1981 to 1983 and served as chairman of the CFTC from 1983 to 1987 and as a member of the board of governors of the Federal Reserve System from 1991 to 1998. Dr. Phillips is a member of the boards of directors of State Farm Mutual Automobile Insurance Company, the Kroger Company, the National Futures Association and the Financial Accounting Foundation. Dr. Phillips holds a B.A. in Mathematics from Agnes Scott College, a M.S. in Finance and Insurance from Louisiana State University, or LSU, and a Ph.D. in Finance and Economics from LSU.

        William R. Power.    Mr. Power is a lessor member of the CBOE, and has been a CBOE member since 1973. He operated an options trading firm, Commercial Crush, Inc., from 1978 until early 2002. Mr. Power traded on the floor of the CBOE from 1973 to 1991. Mr. Power also is a member of the board of directors of the Minneapolis Grain Exchange, and previously was a member of the New York Stock Exchange Board of Executives.

        Samuel K. Skinner.    Mr. Skinner is of counsel to the law firm Greenberg Traurig, LLP where he concentrates on corporate, governmental and regulatory matters. From 2000 to 2003, Mr. Skinner was president and CEO of USF Corporation, and chairman from January 1, 2003 through May 2003. Mr. Skinner previously served as president of Commonwealth Edison Company and its holding company, Unicom Corporation (Exelon Corporation). He also was formerly White House chief of staff to President George H.W. Bush and, prior to that, served as U.S. Secretary of Transportation from February 1989 to December 1991. Mr. Skinner previously was United States Attorney for the Northern District of Illinois from 1975 to 1977, having served in that office for eight years. Mr. Skinner also

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serves on the boards of directors of several public companies. He holds a B.S. in Accounting from the University of Illinois and a J.D. from DePaul University Law School.

        John E. Smollen.    Mr. Smollen is a managing director of Goldman Sachs, and has been with Goldman Sachs since its acquisition in 2000 of Spear, Leads and Kellogg. Mr. Smollen has been a CBOE member since 1997. Mr. Smollen served as the interim Vice Chairman of the CBOE from August 4, 2006 until December 31, 2006.

        Carole Stone.    Ms. Stone served as director of the New York State Division of the Budget from June 2000 to October 2004. She currently serves as a commissioner on the New York State Commission on Public Authority Reform and is on the board of directors of the Nuveen Funds. She has previously served as the chair of the New York Racing Association Oversight Board, as chair of the Public Authorities Control Board and on the board of directors of several New York State public authorities. Ms. Stone holds a B.A. in Business Administration from Skidmore College.

        Howard L. Stone.    From December 1998 until his retirement in March 2005, Mr. Stone was the senior managing director of American Express Tax and Business Services. He is a certified public accountant. Mr. Stone is a member of the board of managers of Arbour Group. Mr. Stone holds a B.S. in Accounting from the University of Illinois.

        Eugene S. Sunshine.    Mr. Sunshine is the senior vice president for Business and Finance at Northwestern University. He has served in that capacity since 1997. Prior to joining Northwestern, he was senior vice president for administration at The John Hopkins University. He currently is a member of the boards of directors of the Nuveen Funds, the Civic Federation, and the Pathways Awareness Foundation. He is also a member of the Board of the District 65 Educational Foundation and a member of the Commercial Club of Chicago. He currently serves as chairman of the board of Rubicon, an insurance affiliate of Northwestern University, and as a member of the boards of the Evanston Chamber of Commerce and Evanston Inventure. He holds a B.A. from Northwestern University and a Masters of Public Administration degree from the Maxwell Graduate School of Citizenship and Public Affairs at Syracuse University.

        Jonathan B. Werts.    Mr. Werts is a managing director of Merrill Lynch, Pierce, Fenner and Smith. He is responsible for both the Broker Dealer Execution Services and Electronic Derivative Execution Divisions managing and overseeing the divisions' business development, strategic planning, and product development. Mr. Werts previously served as Vice President, Derivative Products, for the NYSE Group in Chicago and worked as Vice President, Client and Trading Support, at the Pacific Exchange in San Francisco, where he oversaw the creation of the exchange's new electronic options trading platform and managed the Customer Service and System Support Departments. Mr. Werts is a graduate of California State University, Hayward.

Director Independence

        The experience and qualifications of our directors is critical to our success. The CBOE Holdings board of directors intends to adopt independence standards as part of CBOE Holdings' Corporate Governance Guidelines. A copy of our Corporate Governance Guidelines will be posted on our website, www.CBOE.com. The CBOE Holdings bylaws provide that at least two-thirds of all of the directors of CBOE Holdings must meet the current tests of independence, which are based on government regulations (including those of the SEC), include the independence tests set forth in Section 303A of the NYSE Listed Company Manual and include tests in addition to those tests set forth by the SEC, the NYSE (see the last three bullet-points below) and the NASDAQ Stock Market. The Corporate Governance Guidelines require that the board of directors affirmatively determine the independence of CBOE Holding's directors based on all relevant facts and circumstances that bear upon such director's independence.

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        Under the CBOE Holdings Guidelines, a person shall not qualify as independent under any of the following circumstances:

        In addition, the board has determined that a director may be a Trading Permit Holder, a director, officer, employee or owner of a Trading Permit Holder and/or a customer of CBOE without creating a conflict of interest or the appearance of a conflict of interest. As a result, the board may determine that a director who is a Trading Permit Holder, a director, officer, employee or owner of a Trading Permit Holder and/or a customer of CBOE is "independent," if he or she otherwise satisfies all of the above categorical standards and the independence requirements of any applicable securities exchange on which CBOE Holding's common stock is listed.

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Compensation of Directors and Executive Officers

        CBOE Holdings has not yet paid any compensation to its directors, executive officers or other managers. The form and amount of the compensation to be paid to each of CBOE Holdings' directors, executive officers and other managers will be determined by the CBOE Holdings board of directors as soon as practicable prior to or following the completion of the restructuring transaction.

Director Compensation

        CBOE directors currently receive an annual retainer of $25,000, a fee of $2,500 for each meeting of the board that they attend and reimbursement of expenses for travel to meetings. For board committee service, each director receives $2,500 for each committee meeting they attend. Each committee chair receives an additional annual retainer of $10,000, and the lead director of the board receives an additional $25,000 annual retainer. The chair of the Special Committee of Independent Directors (the "Special Committee") receives a $25,000 annual retainer and the other members of the Special Committee receive a $10,000 annual retainer. After completion of the restructuring transaction, it is expected that the need for the "Special Committee" will cease to exist. In addition to the fees set forth above, it is anticipated that, effective on the date of restructuring transaction, each of the directors of CBOE Holdings will receive an equity grant pursuant to our long-term incentive plan equal to $200,000 worth of restricted stock. For more information on our long-term incentive plan, please see "—Elements of Compensation—Long-Term Incentive Program" below.

        Prior to his leave of absence as Vice Chairman of the board, Bradley G. Griffith was being paid a base annual compensation for 2009 of $450,000. Effective as of July 24, 2009, Mr. Griffith took a leave of absence, until further notice, from his position as Vice Chairman in order to avoid any perceived business conflicts between his role as Vice Chairman and his interests in Edge Specialists, L.L.C. and Edge Capture, L.L.C. (collectively, "Edge"), which are providers of quoting software for options traders at the CBOE and other exchanges. That leave of absence will last through the end of his term on December 31, 2009 or, if earlier, when the Edge litigation ends. In connection with this leave of absence, the CBOE will pay Mr. Griffith $37,500 per month for the remainder of 2009. If the CBOE board of directors determines to pay bonuses to CBOE's officers and directors for 2009, Mr. Griffith will be paid a bonus from the Office of Chairman bonus pool for 2009 equal at least to (i) the amount of the Office of Chairman bonus pool for 2009, multiplied by (ii) Mr. Griffith's percentage of such bonus pool for 2008, multiplied by (iii) seven-twelfths (i.e., the pro rata portion of 2009 for which Mr. Griffith served as Vice Chairman prior to beginning his leave of absence). In addition, if the restructuring transaction occurs during 2009, the CBOE's board of directors has agreed to recommend that, in addition to any grant Mr. Griffith may receive as a director, Mr. Griffith would receive an equity award from CBOE Holdings equal to the lesser of (i) 150% of the value of the equity award granted to directors in connection with the restructuring transaction and (ii) $300,000. If the restructuring transaction occurs during the first six months of 2010, Mr. Griffith would receive, instead of a separate equity award, a cash award equal to the amounts set forth in the previous sentence. If the restructuring transaction occurs in the third or fourth quarter of 2010, that cash award would be reduced to 50% and 25%, respectively. Mr. Griffith would forfeit any potential bonus and the potential equity or cash award described above if, at the time any such award or payment is, or would have been, made, Edge has filed a lawsuit relating to its patents against any member of the CBOE other than those that Edge had sued prior to July 23, 2009.

        We currently anticipate that CBOE Holdings directors will be compensated in a manner that is largely consistent with their current terms and conditions. We do not expect that directors who currently serve on the board of the CBOE and CBOE Holdings will receive any additional compensation for service on both the CBOE and CBOE Holdings boards, except that all directors will receive reimbursement of expenses for travel to meetings of the CBOE when such meetings do not coincide with meetings of CBOE Holdings.

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Executive Compensation

Compensation Discussion & Analysis

Overview

        The individuals who appear on the Company's Summary Compensation table on page 138, which includes the Company's Chairman and Chief Executive Officer; President and Chief Operating Officer; Executive Vice Chairman; Executive Vice President; and Chief Financial Officer are referred to as our "named executive officers."

Compensation Philosophy and Objectives:

        Our executive compensation program is intended to attract and retain the most talented and dedicated executives possible and to motivate our executives and other key employees to achieve corporate goals that are aligned with creating value for our owners. To meet these objectives, we have designed and implemented executive compensation programs to provide pay for performance by setting challenging performance goals for our executives and conditioning a substantial portion of their compensation on the achievement of those goals. We believe that compensation plays a vital role in contributing to the achievement of key strategic business objectives that ultimately drive long-term business success. Accordingly, our compensation programs are designed to focus our executives on achieving the company's critical goals, while taking steps to position the business for sustained financial performance over time.

Role of Compensation Committee

        The compensation committee of the board of directors oversees our executive compensation program. The compensation committee is responsible for approving and evaluating the executive compensation programs. The compensation committee recommends to the board the aggregate compensation as well as the compensation (including benefit programs) of all officers chosen by the board. The compensation committee reviews individually the performance of the Chairman of the Board, Executive Vice Chairman of the Board, Vice Chairman of the Board and the President and makes recommendations to the board in respect to their compensation. The compensation committee is also responsible for:

        The compensation committee meets at least two times per year and is currently comprised of six directors, five of whom would be independent under CBOE Holdings independence criteria. In addition, an external executive compensation consultant (currently McLagan, a division of AON Consulting Worldwide, Inc.), the Chairman and CEO, the President and COO, the Chief Financial Officer and the Vice President of Human Resources generally attend the meetings to provide information and assistance to the committee. The independent external compensation consultant reviews the executive compensation programs and advises the compensation committee of best practices or plan designs that may improve effectiveness. The consultant recommends and audits the peer group, provides benchmark data and assists the committee in monitoring the competitive positioning of the

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various compensation components. The independent consultant meets with the committee in executive session during appropriate committee meetings.

Benchmarking

        To ensure that our compensation is competitive, the compensation committee periodically reviews benchmark data that includes the aggregate level of executive compensation, as well as the mix of elements used to compensate our executive officers. McLagan conducted an in-depth analysis to identify a peer group based upon the CBOE's business mix and size. The peer group includes financial services firms with a heavy focus on technology and an environment similar to the CBOE. The most recent compensation review included data from the following peer group:

BGC Partners, Inc.   MF Global, Ltd
CME Group, Inc.   NASDAQ OMX Group, Inc.
GFI Group, Inc.   NYFIX, Inc.
Intercontinental Exchange Inc.   NYSE Euronext, Inc
Investment Technology Group   OptionsXpress Holdings Inc.
Knight Capital Group, Inc.   Tradestation Group, Inc.
Market Axess Holdings, Inc.   TSX Group, Inc.

        Our executive compensation currently consists of the following key elements:

        Base Salary.    Base salaries for our executives are established based on the scope of their responsibilities, taking into account competitive market compensation paid by other companies, as described above, for similar positions, and similar industry experience. Generally, we believe that executive base salaries should be targeted near the median of the range of salaries for executives in similar positions with similar responsibilities and experience at comparable companies. Base salaries are reviewed periodically and adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities, performance, experience and pay mix.

        Annual Cash Incentive.    The annual cash incentive is intended to compensate executives for achieving financial and operational goals and for achieving individual annual performance objectives. These objectives vary depending on the individual's role and scope of the individual's duties, but relate generally to strategic goals approved by the board.

        Our annual cash incentive is paid in cash. The aggregate amount is reviewed and approved by the compensation committee and the board of directors. The annual cash incentive ordinarily is paid in a single installment in the first quarter following the completion of the fiscal year. Prior to or at the beginning of each fiscal year, the compensation committee and the board of directors approve corporate objectives for the coming fiscal year. For 2008, the compensation committee established as a corporate financial goal a target of $184.6 million in pre-tax profit for the CBOE. At the end of the year, the compensation committee reviews corporate and individual results against the previously approved objectives and makes a recommendation to the board of directors for cash incentive awards based on these results. The compensation committee has discretion to make adjustments to the pre-tax profit target to take into account the positive or negative impact of external events outside the control of senior management, such as litigation or changes in taxation or financial reporting standards. In addition, the committee has full discretion to recommend the cash incentive award to be paid to the named executive officers and other employees. The board of directors may approve, disapprove or

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modify the recommendations of the compensation committee. The independent consultant provides the committee with competitive pay and performance data of the peer group to assist in its deliberations.

        The actual amount paid in 2009 was primarily driven by the CBOE's financial performance in 2008. Actual pre-tax profit for 2008 was $193.4 million, which was in excess of the established target. Despite the national economic turbulence, the CBOE experienced record volume and a $53.4 million increase in pre-tax profit compared to 2007. In consultation with its compensation consultant, the compensation committee determined that, in light of the record volume and increase in pre-tax profit over 2007, the aggregate bonus payments for 2008 should not be less than the aggregate bonus payments for 2007. As a result, the committee determined to increase the aggregate amount of bonus payments for all employees by $1.5 million over 2007. In addition to overall corporate performance, during the fourth quarter of 2008, the compensation committee reviewed the individual performance of Messrs. Brodsky, Joyce and Tilly and, based on this review, established its recommendations for bonuses to be paid to these executive officers for 2008. These recommendations were approved by the board of directors. Messrs. Brodsky and Joyce reviewed the individual performance of Messrs. DuFour and Dean and established, based on the corporate and individual performance, the bonus to be paid to Messrs. DuFour and Dean. The amounts for the named executive officers are reflected in the Summary Compensation Table under the "Bonus" column.

        The compensation committee has adopted a new Annual Cash Incentive Plan, beginning for the 2009 fiscal year, that will operate in substantially the same manner as the prior plan. The plan is designed to include a long-term incentive component and designed to enhance the goal of staff retention. Under the new plan, with respect to any annual bonus greater than $50,000, a portion of that bonus will be paid in cash in a single installment in the first quarter following the completion of the fiscal year, and the remainder will be subject to vesting based on continued service to the CBOE or CBOE Holdings. The portion of the bonus subject to vesting will be paid in 25% installments each year for four years following the initial bonus payout, and the payments may be made in either cash or stock as may be determined by the board. The single installment component is intended to be competitive with the annual cash incentive paid by companies within our peer group while the deferred payment component is intended to be competitive with the annual equity award paid by companies within the peer group.

        Long-Term Incentive Program.    We strongly believe that an ownership culture will enhance the long-term success of the CBOE and CBOE Holdings. As a result of the restructuring transaction, we will be able to use stock based awards to align the interests of management with that of stockholders. With the help of an outside consultant, the compensation committee of the CBOE reviewed and recommended a long-term incentive plan to be implemented by CBOE Holdings effective at the time of the restructuring transaction. The plan provides for the issuance of restricted stock, restricted stock units and non-qualified stock options. Under the plan, an amount of shares equal to 2.75% of the total number of shares of CBOE Holdings to be outstanding following the restructuring transaction and the issuance of shares pursuant to the Settlement Agreement will be available for issuance. The board of directors of the CBOE has adopted the plan and has determined to recommend that CBOE Holdings make initial awards of restricted stock under the plan, upon effectiveness of the restructuring transaction, to the directors of CBOE Holdings and to members of senior management and other employees of the CBOE.

The committee determined that CBOE Holdings should grant the initial awards of restricted stock in order to:

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        It is intended that CBOE Holdings would approve the actual grants and vesting requirements prior to the effective time of the restructuring transaction.

        Other Compensation.    The compensation committee, with the approval of the board, may revise or terminate employment agreements. In light of the restructuring transaction, agreements of executive officers will be reviewed, and, where appropriate, changes will be recommended.

Summary Compensation

        The following table and the related notes set forth information relating to the compensation paid to each of the named executive officers of the CBOE, consisting of the CBOE's Chief Executive Officer and Chief Financial Officer and each of the next three most highly compensated of the CBOE's executive officers, serving as of December 31, 2008.


Name and Principal Position
  Year
  Salary
  Bonus (1)(2)
  All Other
Compensation
(3) (4)

  Total
 

William J. Brodsky
Chairman and Chief Executive Officer
  2008
2007
2006
  $
$
$
1,400,000
1,400,000
1,350,000
  $
$
$
1,500,000
1,200,000
675,000
  $
$
$
661,865
693,067
619,188
  $
$
$
3,561,865
3,293,067
2,644,188
 

Edward J. Joyce
President and Chief Operating Officer
  2008
2007
2006
  $
$
$
750,000
750,000
712,500
  $
$
$
800,000
700,000
365,100
  $
$
$
356,903
359,208
245,045
  $
$
$
1,906,903
1,809,208
1,322,645
 

Edward T. Tilly
Executive Vice Chairman(5)
  2008
2007
2006
  $
$
$
600,000
600,000
492,217
  $
$
$
700,000
600,000
379,500
  $
$
$
203,036
194,848
77,949
  $
$
$
1,503,036
1,394,848
949,666
 

Richard G. DuFour
Executive Vice President
  2008
2007
2006
  $
$
$
526,705
507,904
490,487
  $
$
$
433,500
400,000
240,000
  $
$
$
179,931
246,417
190,280
  $
$
$
1,140,136
1,154,321
920,767
 

Alan J. Dean
Executive Vice President and Chief Financial Officer
  2008
2007
2006
  $
$
$
406,279
391,776
357,444
  $
$
$
418,200
330,000
172,564
  $
$
$
148,200
149,230
108,239
  $
$
$
972,679
871,006
638,247
 

(1)
The amounts shown reflect the total cash incentive paid to the individual under the Company's annual incentive plan. For a discussion of the CBOE's annual incentive plan, please see "Compensation Discussion & Analysis—Elements of Compensation—Annual Cash Incentive" above.

(2)
Cash incentive amounts for services performed in 2008, 2007 and 2006 by named executive officers were paid in early 2009, 2008 and 2007, respectively.

(3)
The amounts shown represent benefits which are from time to time made available to the senior management of the CBOE, including life insurance, club memberships, financial services, parking, tax gross-ups and certain other perquisites, including payment of health care expenses not covered by insurance. For more information on the amounts shown in this column, please see the table below under the heading "All Other Compensation Detail."

(4)
The CBOE executives are entitled to participate in all employee benefit plans, which include the CBOE contribution to a qualified 401(k) savings plan and the CBOE contribution to non-qualified plans. The amount shown includes the CBOE's contribution to its qualified 401(k) plan on behalf of each of the officers listed above as well as the CBOE's contribution to its non-qualified defined contribution plan on behalf of each officer. The amounts shown below with respect to the Non-Qualified Defined Contributions made by the CBOE are the same amounts shown in the Non-Qualified Deferred Compensation Table which follows.

(5)
Includes compensation earned as Vice Chairman of the CBOE from January 2006 to August 2006 and as Executive Vice Chairman from August 2006 through December 2008.

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All Other Compensation Detail

 
   
   
   
   
   
   
   
   
   
   

Name
  Year
  Qualified
Defined
Contributions

  Non-Qualified
Defined
Contributions
(1)

  Insurance
  Club
Memberships

  Financial
Services

  Parking
  Tax
Gross
Ups

  Other
(2)

  Total

William J. Brodsky   2008
2007
2006
  $
$
$
18,400
18,000
17,600
  $
$
$
312,162
356,780
265,900
  $
$
$
27,772
29,941
29,646
  $
$
$
24,843
22,690
21,088
  $
$
$
27,231
15,243
11,200
  $
$
$
5,460
5,460
5,460
  $
$
$
14,783
13,739
20,838
  $
$
$
231,214
231,214
247,456
  $
$
$
661,865
693,067
619,188

Edward J. Joyce   2008
2007
2006
  $
$
$
18,400
18,000
17,600
  $
$
$
300,040
300,334
197,920
  $
$
$
1,806
1,806
966
  $
$
$
10,178
8,386
9,739
  $
$
$
4,700
4,650
1,750
  $
$
$
4,800
4,800
4,800
  $
$
$
11,979
11,232
4,770
  $
$
$
5,000
10,000
7,500
  $
$
$
356,903
359,208
245,045

Edward T. Tilly   2008
2007
2006
  $
$
$
18,400
0
0
  $
$
$
156,779
136,759
22,769
  $
$
$
630
420
105
  $
$
$
10,565
8,220
49,985
  $
$
$
2,485
9,523
2,590
  $
$
$
564
731
0
  $
$
$
8,613
34,195
0
  $
$
$
5,000
5,000
2,500
  $
$
$
203,036
194,848
77,949

Richard G. DuFour(3)   2008
2007
2006
  $
$
$
18,400
18,000
17,600
  $
$
$
149,682
215,645
165,022
  $
$
$
5,334
2,772
2,772
  $
$
$
0
0
0
  $
$
$
0
0
0
  $
$
$
0
0
0
  $
$
$
6,515
0
4,886
  $
$
$
0
10,000
0
  $
$
$
179,931
246,417
190,280

Alan J. Dean(3)   2008
2007
2006
  $
$
$
18,400
17,946
17,600
  $
$
$
125,576
127,060
88,402
  $
$
$
966
966
966
  $
$
$
0
0
0
  $
$
$
0
0
0
  $
$
$
0
0
0
  $
$
$
3,258
3,258
1,271
  $
$
$
0
0
0
  $
$
$
148,200
149,230
108,239

(1)
The amount shown includes CBOE's contribution to its non-qualified defined contribution plans on behalf of each officer including CBOE's supplement executive retirement contributions, the executive variable defined contributions (based on phantom shares valued based on a CBOE seat price) and the executive defined contributions (based on participant's age).

(2)
The amount shown for Mr. Brodsky includes $231,214 paid in each of 2008 and 2007 and $222,956 paid in 2006, representing a payment of 10% of his base salary for each respective year, grossed up for taxes, pursuant to his employment contract. The 2006 amount also includes $24,500 paid to Mr. Brodsky by the National Stock Exchange for his services as one of its directors, which the CBOE has the right to appoint.

(3)
Except with respect to the amount paid to Mr. DuFour in 2007, the aggregate perquisites paid to Messrs. DuFour and Dean for the periods shown above did not exceed $10,000. As such, no amounts are included for perquisites in table above for Messrs. DuFour (other than for 2007) and Dean.

Non-Qualified Deferred Compensation

 
   
   
   
   
   
   

Name
(a)

   
  Executive
Contributions
In Last FY
(b)

  Registrant
Contributions
In Last FY
(c)

  Aggregate
Earnings in
Last FY
(d)

  Aggregate
Withdrawals/
Distributions
(e)

  Aggregate
Balance at
Last FYE
(f)


William J. Brodsky   Suppl Ret   $ 352,733   $ 217,067   ($ 626,892 ) $ 0   $ 1,130,176

    Exec Ret   $ 0   $ 95,095   ($ 43,903 ) $ 0   $ 420,886

Edward J. Joyce   Suppl Ret   $ 173,713   $ 106,900   ($ 309,122 ) $ 0   $ 538,791

    Exec Ret   $ 0   $ 193,140   ($ 171,172 ) $ 0   $ 457,266

Edward T. Tilly   Suppl Ret   $ 43,200   $ 86,400   ($ 1,825 ) $ 0   $ 138,745

    Exec Ret   $ 0   $ 70,379   $ 21,554   $ 0   $ 152,004

Richard G. DuFour   Suppl Ret   $ 33,576   $ 59,936   ($ 109,479 ) $ 0   $ 188,364

    Exec Ret   $ 0   $ 89,746   ($ 148,113 ) $ 0   $ 361,488

    Def Comp   $ 105,341   $ 0   ($ 163,971 ) $ 0   $ 467,803

Alan J. Dean   Suppl Ret   $ 31,688   $ 47,788   ($ 77,475 ) $ 0   $ 114,275

    Exec Ret   $ 0   $ 77,788   ($ 71,811 ) $ 0   $ 189,506

(1)
The amount of executive contributions made by each named executive officer and reported on an accrual basis in column (b) is included in each named executive officer's compensation reported on the Summary Compensation Table as Salary.

139


(2)
The amount of Company contributions reported on an accrual basis in column (c) for each named executive officer is also included in each named executive officer's All Other Compensation reported on the Summary Compensation Table.

(3)
The amounts included in Aggregate Earnings in Last FY and Aggregate Balance at Last FYE are reported on a cash basis in column (d) and (f), respectively.

Non-Qualified Defined Contribution income consists of 401(k) excess payments made by the CBOE to compensate the executive as a result of participation limitations imposed under federal law and payments made under other non-qualified plan provisions that are described more fully below.

Employee Benefit Plans

        CBOE Holdings and its subsidiaries will maintain the 401(k)-type plan currently sponsored by the CBOE. This is a defined contribution retirement plan intended to qualify under Section 401(k) of the Internal Revenue Code. Employees of CBOE Holdings and its subsidiaries will be eligible to participate in this plan upon hire. The CBOE matching contributions do not begin until the employee has completed one year of service. The CBOE does not provide any form of defined benefit retirement plan to its employees.

        The following table describes the elective employee and matching employer contributions as defined under this plan, and the vesting of employer contributions:

 
   

Employee Contributions*
  Employer Contributions

Basic Pre-or After Tax 1-4%   200% Match up to 4% of employee contributions

Voluntary Pre-Tax 5-13%   None

Voluntary After-Tax 5-13%   None

Vesting of Employer Contributions   20% each year. Participants become fully vested after completing five years of service.

*Subject to statutory annual limits

        CBOE Holdings and its subsidiaries will maintain the non-qualified plans currently in place at CBOE that are not subject to the Employee Retirement Income Security Act of 1974. CBOE currently has three non-qualified plans. The Supplemental Executive Retirement Plan (SERP) is designed for employees of CBOE whose level of compensation exceed the IRS defined annual compensation limit ($230,000 for 2008). This plan provides a CBOE matching contribution on earnings in excess of the IRS compensation limit that mirrors the 401(k).

        All named executive officers are eligible to participate in the Executive Retirement Plan. This non-qualified plan is not subject to the Employee Retirement Income Security Act of 1974. Effective March 22, 2007, the board of directors approved a new method for calculating the company's annual contribution for each eligible participant, aligning the contribution with the value of a CBOE seat. In lieu of a flat cash contribution for fiscal years ending 2006, 2007 and 2008, the CBOE's aggregate contribution each year will be made in phantom shares that equal one-third of a CBOE seat. The total annual contribution amount is based on a formula that takes in account the fair market value of a seat (based on the last three seat sales in the month following the end of the fiscal year) discounted by a percentage provided by an independent financial advisory firm. The number of phantom shares that each participant receives is proportional to that individual's total cash compensation for the year relative to the other participants. As of August 14, 2009, the compensation committee has not yet determined if the contribution for 2009 will be made in the form of additional phantom shares or cash.

140


        Messrs. Joyce, Tilly, Dean and DuFour are eligible to participate in the age-based component of the Executive Retirement Plan. This non-qualified plan is not subject to the Employee Retirement Income Security Act of 1974. Each eligible employee receives an amount equal to a certain percentage of the employee's base salary and cash incentive. The percentage is dependent on the age of the eligible participant. The following table defines the percentage contribution for each age group. Mr. Brodsky is not eligible to participate in this plan. Under the terms of his employment agreement, Mr. Brodsky receives an amount equal to 10% of his base pay, grossed-up for tax effects, at the end of each fiscal year.


Age of Participant
  Contribution Percentage

Under 45     1%

45 to 49     3%

50 to 54     6%

55 to 59     9%

60 to 64   11%

65 and over   None

        All CBOE named executive officers are eligible to participate in the CBOE's Deferred Compensation Plan. The plan allows the named executive officers to defer up to 20% of their base compensation and cash incentive award annually. The CBOE does not contribute or match any contributions made to this plan. This plan allows for the tax free build-up of deferred compensation for officers participating in this plan.

        All CBOE contributions to non-qualified defined contribution plans vest 20% for each year of service, identical to the qualified 401(k) plan.

        CBOE Holdings and its subsidiaries will maintain the health plan currently sponsored by the CBOE which provides multiple medical and dental coverage options covering eligible participants and their dependents. New employees are eligible to participate in the plan if working on a full-time basis after one month of active service. The plan is funded through a combination of fully insured and self-funded arrangements. Employees contribute specified amounts to the plan, depending on the medical or dental option elected and the number of dependents covered. Insurance carriers and paid claims administrators adjudicate the claims.

        Former CBOE employees with 10 or more years of service who leave the CBOE after reaching the age of 50 are eligible to participate in the CBOE Retired Employees Health Plan. The plan allows former employees to obtain health care coverage under approximately the same terms provided to current CBOE employees. All participants in the plan are required to contribute amounts approximately equal to the CBOE's total cost of providing the health insurance benefit.

        CBOE Holdings and its subsidiaries will maintain benefit plans providing life, disability and accidental death and dismemberment benefits to eligible full time employees. New employees are eligible for life and accidental death and dismemberment coverage after one month of consecutive service and for short-term disability coverage after six months of consecutive service. The CBOE employees whose annual base salary exceeds $50,000 are eligible for the long-term disability plan upon hire and are obligated to pay the full cost of this insurance.

141


Severance, Change in Control and Employment-Related Agreements

        The CBOE entered into an employment contract with William J. Brodsky, our Chairman and Chief Executive Officer. Mr. Brodsky's contract is currently scheduled to end on December 31, 2010. His contract includes an automatic renewal of a one-year term unless notice not to renew is given by either party at least one year in advance of the beginning of the new term. The agreement provides for a base salary of $1,400,000. Mr. Brodsky is eligible to receive a cash incentive each fiscal year at the sole discretion of the board of directors. The agreement also provides for an annual retirement payment equal to 10% of Mr. Brodsky's base salary grossed-up for tax effects. He is entitled to participate in all of our employee benefit plans that are generally available to senior management, except for the age-based non-qualified retirement plan described previously. This employment agreement may be terminated for cause. If the agreement is terminated without cause by the CBOE or for good reason by Mr. Brodsky, the CBOE will pay Mr. Brodsky a severance payment equal to the greater of (1) one times his then current annual base plus an amount equal to one times the annual target cash incentive or (2) a prorated base and target cash incentive for the remainder of his contract term. If this agreement is terminated by the CBOE or a successor as a result of a change in control, the CBOE will pay Mr. Brodsky a severance payment equal to two times his then current annual base and annual target cash incentive. The CBOE will provide a gross-up payment to Mr. Brodsky to cover any excise and related income tax liability arising under Section 280G of the Internal Revenue Code as a result of any payment or benefit arising under the agreement. In the event of a termination without cause or a change in control, Mr. Brodsky would also receive a supplemental retirement payment equal to 10% of the salary paid as result of the termination, grossed up for tax effects, and contributions under CBOE's retirement plans in an amount equal to the aggregate contributions that would have been made during the period of one year or the remaining terms of the agreement, whichever is greater. Pursuant to the agreement, Mr. Brodsky agrees to certain non-competition provisions during the employment term and for two years thereafter.

        We also have an Employment Agreement with each of the following, as outlined below:

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        The CBOE has also entered into a Letter of Agreement with Alan J. Dean, our Executive Vice President and Chief Financial Officer. Mr. Dean's agreement is currently scheduled to end on December 31, 2009. The agreement will automatically renew for successive one-year terms unless either CBOE or Mr. Dean gives 180-day notice not to renew. The Letter of Agreement stipulates that the CBOE will pay a severance payment equal to two times his then current annual base salary and annual target cash incentive if he is terminated without cause by CBOE or if Mr. Dean terminates his employment for good reason.

        Under the agreements discussed above, the CBOE and each of the executives have agreed to amend for 2009 the 180-day notice period to a 90-day notice period in which either party to the agreement could provide notice of its intention not to renew. These amendments were provided in order to allow the compensation committee of the CBOE additional time to consider possible revisions to the agreements.

        The following table shows the potential payment to each officer pursuant to each individual's agreement discussed above upon the termination of the executive's employment either without cause by the CBOE or for good reason by the executive or the termination of the executive's employment by the CBOE upon a change in control of the CBOE:


Name
   
  Salary
  Cash
Incentive

  Other (3)
  Total

William J. Brodsky   (1)   $ 1,400,000   $ 560,000   $ 405,743   $ 2,365,743

    (2)   $ 2,800,000   $ 1,120,000   $ 793,823   $ 4,713,823

Edward J. Joyce   (1)   $ 1,500,000   $ 562,500   $ 381,585   $ 2,444,085

    (2)   $ 2,250,000   $ 843,750   $ 556,898   $ 3,650,648

Edward T. Tilly   (1)   $ 1,200,000   $ 450,000   $ 155,539   $ 1,805,539

    (2)   $ 1,800,000   $ 675,000   $ 229,789   $ 2,704,789

Richard G. DuFour   (1)(2)   $ 1,073,052   $ 375,568   $ 133,553   $ 1,582,173

Alan J. Dean   (1)(2)   $ 827,709   $ 289,698   $ 187,397   $ 1,304,804

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(1)
Represents amounts to be paid in connection with a termination of the executive's employment by the CBOE without cause or a termination of employment by the executive for good reason. For purposes of these calculations, we have assumed that such termination occurred on December 31, 2008.

(2)
Represents amounts to be paid in connection with a termination of the executive's employment upon a change in control. For purposes of these calculations, we have assumed that change in control occurred on December 31, 2008.

(3)
The amounts shown represent amounts contributed on behalf of the executive under the CBOE's qualified and non-qualified defined contribution plans in connection with such executive's termination. It also includes estimated medical insurance and outplacement cost.

Pension Benefits

        The CBOE does not currently have any defined benefit retirement plans.

Compensation Committee Interlocks and Insider Participation

        None of the members of CBOE's compensation committee is an executive officer or employee of the CBOE. None of the CBOE's executive officers serves as a member of a compensation committee of any entity that has one or more executive officers serving on the CBOE's compensation committee. This will continue to be true of CBOE Holdings immediately following the restructuring transaction.

Beneficial Ownership of Management and Directors

        The following table lists the shares of capital stock of CBOE Holdings that will be beneficially owned following the completion of the restructuring transaction by each of the directors, each of the executive officers named in the summary compensation table included at "Executive Compensation" above and CBOE Holdings' directors and executive officers as a group. Except as otherwise indicated below, this information is based on the beneficial ownership known to us by those persons of CBOE memberships as of December 31, 2008. There was no person known to us to be the beneficial owner of more than five percent of the membership interests of the CBOE as of such date and none of the

144



persons listed in the table below are currently expected to beneficially own one percent or more of any of the shares of common stock of CBOE Holdings.


Name
  Number of Shares of
common stock of
CBOE Holdings (1)

  Percent
of
Class


William J. Brodsky   [        ]   **

Edward J. Joyce   [        ]   **

Edward T. Tilly   [        ]   **

John E. Smollen   [        ]   **

Alan J. Dean   [        ]   **

Richard G. DuFour   [        ]   **

Joanne Moffic-Silver   [        ]   **

Gerald T. O'Connell   [        ]   **

Edward L. Provost   [        ]   **

Phillip M. Slocum   [        ]   **

Timothy H. Thompson   [        ]   **

Robert J. Birnbaum   [        ]   **

James R. Boris   [        ]   **

Mark F. Duffy   [        ]   **

David A. Fisher   [        ]   **

Janet P. Froetscher   [        ]   **

Bradley G. Griffith   [        ]   **

Paul Kepes   [        ]   **

Stuart J. Kipnes   [        ]   **

Duane R. Kullberg   [        ]   **

Benjamin R. Londergan   [        ]   **

Anthony D. McCormick   [        ]   **

R. Eden Martin   [        ]   **

Roderick Palmore   [        ]   **

Kevin Murphy   [        ]   **

Susan M. Phillips   [        ]   **

William R. Power   [        ]   **

Samuel K. Skinner   [        ]   **

Carole Stone   [        ]   **

Howard L. Stone   [        ]   **

Eugene S. Sunshine   [        ]   **

Jonathan B. Werts   [        ]   **

All directors and executive officers as a group   [        ]   [    ]

(1)
Stock holdings indicated represent the number of shares of unrestricted common stock such individual will receive pursuant to CBOE Holdings' long-term incentive plan in the form of restricted stock following the completion of the restructuring transaction. For a description of the long-term incentive plan and a description of the restricted stock awards, please see "Executive Compensation—Compensation Discussion and Analysis—Long-Term Incentive Program" on page 137.

145



DESCRIPTION OF CBOE HOLDINGS CAPITAL STOCK

        The following summary is a description of the material terms of CBOE Holdings' capital stock as of the effective time of the restructuring transaction and is not complete. You should also refer to (1) the form of CBOE Holdings amended and restated certificate of incorporation that will be in effect as of the completion of the restructuring transaction, which is included as Annex C to this proxy statement and prospectus, (2) the form of CBOE Holdings amended and restated bylaws that will be in effect as of the completion of the restructuring transaction, which is included as Annex D to this proxy statement and prospectus and (3) the applicable provisions of the Delaware General Corporation Law.

        As of the effective time of the restructuring transaction, CBOE Holdings will be authorized to issue up to (i)              shares of unrestricted common stock, par value $0.01 per share, (ii)             shares of Class A common stock, $0.01 par value per share, (iii)               shares of Class A-1 common stock, $0.01 par value per share, (iv)              shares of Class A-2 common stock, $0.01 par value per share, (v)              shares of Class B non-voting common stock, $0.01 par value per share, and (vi) 20,000,000 shares of preferred stock, $0.01 par value per share. Immediately following the restructuring transaction, CBOE Holdings expects there to be approximately             shares of Class A common stock and              shares of Class B common stock and no shares of preferred stock outstanding.

Common Stock

        All common stock, regardless of class, will have the same rights and privileges, except that the Class A common stock issued in the restructuring transaction and the Class B common stock issued to Participating Group A Settlement Class Members will be subject to certain transfer restrictions as set forth herein. The Class A-1 and Class A-2 common stock into which the Class A and Class B convert will also be subject to the transfer restrictions set forth herein. In addition, the Class B common stock will have no voting privileges, except as set forth herein. CBOE Holdings will have the ability to issue the unrestricted common stock, including in connection with a public offering of shares of stock to investors who were not members of the CBOE prior to the restructuring transaction or holders of trading permits in the CBOE following the restructuring transaction.

        Holders of CBOE Holdings common stock are entitled to receive dividends when, as and if declared by the CBOE Holdings board of directors out of funds legally available for payment, subject to the rights of holders, if any, of CBOE Holdings preferred stock. For more information about CBOE Holdings' dividends, see "Risk Factors—Risks Relating to the Restructuring Transaction" on page 15. The CBOE Holdings board of directors has not yet established a policy with respect to the payment of dividends following the restructuring transaction. Any decision to pay dividends on CBOE Holdings common stock will be at the discretion of the CBOE Holdings board of directors. The CBOE Holdings board of directors may or may not determine to declare dividends in the future. The board's determination to issue dividends will depend upon the profitability and financial condition of CBOE Holdings and its subsidiaries, contractual restrictions, restrictions imposed by applicable law and the SEC, and other factors that the CBOE Holdings board of directors deems relevant.

        Each holder of CBOE Holdings common stock is entitled to one vote per share except for the Class B common stock. The Class B common stock of CBOE Holdings shall have no voting privileges or rights of any kind, except the Class B common stock shall have the right to vote (i) as required by Delaware General Corporation Law and (ii) on any proposed consolidation or merger of CBOE Holding with another entity, but only if such consolidation or merger would result in either

146


(x) the consideration per share received by the holders of the Class A common stock being different than the consideration per share received by the holders of the Class B common stock or (y) an amendment to the CBOE Holdings certificate of incorporation that affects the powers, designations, preferences and relative, participating, optional and other special rights, if any, and the qualifications, limitations and restrictions of the Class B common stock differently than such amendment affects the rights of the Class A common stock. Subject to the rights, if any, of the holders of any series of preferred stock if and when issued and subject to applicable law, the holders of common stock except for the Class B common stock will have the right to vote on all matters upon which the stockholders of CBOE Holdings will be entitled to vote generally, including the election of directors.

        There are no cumulative voting rights. Accordingly, the holders of a majority of the shares of common stock voting for the election of directors can elect all of the directors if they choose to do so, subject to any voting rights of holders, if any, of preferred stock to elect directors.

        In the event of a voluntary or involuntary liquidation, dissolution or winding up of CBOE Holdings, the holders of CBOE Holdings common stock will be entitled to share equally in any of the assets available for distribution after CBOE Holdings has paid in full all of its debts and after the holders of all outstanding series of CBOE Holdings preferred stock, if any, have received their liquidation preferences in full.

        If CBOE Holdings completes a public offering, all shares of Class A common stock and Class B common stock will convert to shares of Class A-1 and Class A-2 common stock, effective at the time the shares of CBOE Holdings common stock are issued in the public offering, as follows:

Each share of Class A-1 and Class A-2 common stock issued in conversion of the Class A common stock and Class B common stock shall have all the same rights and privileges and will be subject to the lock-up restrictions applicable to its class. For a description of the lock-up restrictions please see "Transfer Restrictions of the Class A, Class A-1, Class A-2 and Class B Common Stock of CBOE Holdings" below.

        The Class A-1 common stock and Class A-2 common stock, into which the Class A and Class B common stock would convert should CBOE Holdings complete a public offering, will convert to unrestricted common stock, subject to CBOE Holdings' right to conduct an organized sale, and to thereby delay the scheduled dates of such conversion, as follows:

147


Following the conversion of the shares of Class A-1 common stock and Class A-2 common stock into unrestricted common stock, all such shares of Class A-1 and Class A-2 common stock shall be retired and shall not be reissued.

        In the event of any CBOE Holdings Conversion Event (as defined below), holders of the Class B common stock shall be entitled to the same consideration on a per share basis as the holders of the Class A common stock. The term "CBOE Holdings Conversion Event" shall mean (i) any consolidation, combination or merger of CBOE Holdings with another Person (as defined below) (regardless of which entity is the surviving entity), (ii) the sale of all or substantially all of the assets of the CBOE Holdings to another Person, (iii) the liquidation, dissolution, or winding up of CBOE Holdings or (iv) any recapitalization, reorganization or other transaction or event, in each case, upon the effectiveness of which the holders of Class A common stock shall be entitled to receive securities, cash or other assets (or any combination thereof) upon conversion of or in exchange for such Class A common stock. The term "Person" shall mean an individual, partnership (general or limited), joint stock company, corporation, limited liability company, trust or unincorporated organization or any governmental entity or agency or political subdivision thereof.

        The issued and outstanding shares of CBOE Holdings common stock are fully paid and nonassessable. Holders of shares of CBOE Holdings common stock are not entitled to preemptive rights. Shares of CBOE Holdings common stock are not convertible into shares of any other class of capital stock, except with respect to the shares of Class B common stock that automatically convert to shares of Class A common stock as set forth above.

Preferred Stock

        CBOE Holdings will be authorized to issue up to 20,000,000 shares of preferred stock. The amended and restated certificate of incorporation authorizes the board to issue these shares in one or more series, to determine the designations and the powers, preferences and rights and the qualifications, limitations and restrictions thereof, including the dividend rights, conversion or exchange rights, voting rights (including the number of votes per share), redemption rights and terms, liquidation preferences, sinking fund provisions and the number of shares constituting the series. The board of directors of CBOE Holdings could, without stockholder approval, issue preferred stock with voting and other rights that could adversely affect the voting power and other rights of the holders of common stock and which could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, a majority of our outstanding voting stock.

        Subject to the rights of the holders of any series of preferred stock, the number of authorized shares of preferred stock may be increased or decreased (but not below the number of shares thereof then outstanding) by resolution adopted by our board of directors and approved by the affirmative vote of the holders of a majority of the voting power of all outstanding shares of capital stock entitled to vote on the matter, voting together as a single class.

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Transfer Restrictions on the Class A, Class A-1, Class A-2 and Class B Common Stock of CBOE Holdings

        The CBOE Holdings certificate of incorporation subjects the Class A common stock of CBOE Holdings issued to CBOE members in the restructuring transaction and the Class B common stock to be issued to the Participating Group A Settlement Class Members pursuant to the Settlement Agreement, as well as the Class A-1 and Class A-2 common stock which the Class A and Class B common stock will convert upon the closing of a public offering, to certain transfer restrictions.

        Following the restructuring transaction and unless and until a public offering by CBOE Holdings of its common stock has been completed, pursuant to the certificate of incorporation of CBOE Holdings, transfers of common stock of CBOE Holdings may only take place through the agent of CBOE Holdings that has been designated by CBOE Holdings to manage such transfers and through the broker or market designated by CBOE Holdings as the sole broker or market for such transfers. The broker will maintain a record of the prices bid and offered by sellers and buyers and the time such bids and offers are submitted. When a bid and offer match, the broker will consummate the transaction and inform the parties. It is intended that this process will function much like the existing process for the sale and transfer of CBOE Seats.

        In addition, in the event the CBOE Holdings board of directors determines to proceed with a future public offering, the board may institute lock-up restrictions with respect to the Class A and Class B common stock by issuing a press release to the effect that such transfer restrictions will commence on a date no earlier than 10 calendar days following the date of such announcement. These transfer restrictions are sometimes referred to as the "Interim Transfer Restrictions." The Class A and Class B common stock shall remain subject to these Interim Transfer Restrictions until such shares are converted into shares of Class A-1 and A-2 common stock at the time of the closing of any such public offering. At that time, the shares of Class A-1 and A-2 common stock will be issued subject to similar transfer restrictions. During this lock-up period, shares of Class A common stock and Class B common stock of CBOE Holdings may not be directly or indirectly assigned, offered for sale, sold, transferred or otherwise disposed of, except pursuant to limited exceptions set forth in the CBOE Holdings certificate of incorporation, which provides for certain permitted transfers to affiliates, family members, qualified trusts and estates, as well as certain pledges and the potential transfer upon a bona fide foreclosure resulting therefrom.

        In the event CBOE Holdings engages in a public offering of its common stock in the future, the shares of Class A and Class B common stock automatically shall convert, effective at the time of the closing of such public offering, into shares of Class A-1 and Class A-2 common stock and upon issuance will be subject to the transfer restrictions or "lock-up restrictions" under CBOE Holdings' certificate of incorporation. These lock-up restrictions will expire on the Class A-1 and Class A-2 common stock as of the 180th and 360th day, respectively, following the closing date of any such public offering. During any applicable lock-up period, shares of the affected series of CBOE Holdings common stock may not be directly or indirectly assigned, offered for sale, sold, transferred or otherwise disposed of, except pursuant to limited exceptions set forth in the CBOE Holdings certificate of incorporation, which provides for certain permitted transfers to affiliates, family members, qualified trusts and estates, as well as certain pledges and the potential transfer upon a bona fide foreclosure resulting therefrom. Subject to possible extension in the event of an organized sale, as set more fully in this proxy statement and prospectus, upon the expiration of the applicable lock-up period with respect to each of the Class A-1 and Class A-2 common stock, the shares of the Class A-1 and Class A-2 common stock then scheduled to expire will automatically convert from Class A-1 and Class A-2 common stock to unrestricted common stock that will be freely transferable.

        A public offering of CBOE Holdings means a public offering of CBOE Holdings common stock that has been underwritten by one or more underwriting firms. A public offering of CBOE Holdings

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could be an offering of newly-issued shares by CBOE Holdings, an offering of shares owned by CBOE Holdings stockholders or a combination of both, as determined by the board of directors of CBOE Holdings.

        In addition to the restrictions described above, all shares of Class A, Class B, Class A-1 and Class A-2 common stock must be registered in the name of the owner and may not be registered in the name of any nominee or broker.

        After the completion of the restructuring transaction, the CBOE Holdings board of directors may, at its discretion, remove the transfer restrictions applicable to any number of shares of CBOE Holdings common stock on terms and conditions and in ratios and numbers that it may fix in its sole discretion.

        Prior to the removal of the transfer restrictions from any such share, neither any record owner nor any beneficial owner of such share may, directly or indirectly, assign, sell, transfer or otherwise dispose of such share, except pursuant to one of the following limited exceptions set forth in our certificate of incorporation:

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        If all of the beneficial owners of a share of our common stock die, the transfer restrictions will automatically be removed from such share. In addition to the rules with respect to the transfers described above, any common stock that is transferred pursuant to the exceptions above will remain subject to the transfer restrictions and other terms of the certificate of incorporation.

        The CBOE Holdings board of directors may, as and if it determines appropriate, provide holders of the common stock of CBOE Holdings with opportunities, from time to time, to sell such stock pursuant to registered offerings. If the board of directors determines to do so, it will remove the transfer restrictions from the shares of our common stock that are sold in these offerings. The CBOE Holdings board of directors expects to determine whether to conduct any future offerings, the number of such offerings (if any), the maximum number of shares of our common stock eligible to be sold in any offering and the timing of these offerings based upon its view at the time of the market's ability to absorb the newly unrestricted shares to be sold in the offering without an adverse impact on the market price of shares of our common stock, should such a market develop. See "—Organized Sales" below.

        These provisions of the CBOE Holdings certificate of incorporation could delay or deter a change of control of CBOE Holdings, which could adversely affect the price of CBOE Holdings common stock.

Ownership and Voting Limits on CBOE Holdings Common Stock

        The CBOE Holdings certificate of incorporation places certain ownership and voting limits on the holders of CBOE common stock:

        The term "related persons" means, with respect to any person:

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        In the event that a person, either alone or together with its related persons, beneficially owns shares of our stock representing more than 10% of the outstanding shares of common stock (or, in the event that we have completed a public offering of our common stock, 20% of the outstanding shares of common stock), such person and its related persons shall be obligated to sell promptly, and CBOE Holdings will be obligated to purchase promptly, at a price equal to the par value of such shares of stock and to the extent that funds are legally available for such purchase, that number of shares of our stock necessary so that such person, together with its related persons, shall beneficially own shares of our stock representing in the aggregate no more than 10% of the outstanding shares of common stock (or, in the event that we have completed a public offering of our common stock, 20% of the outstanding shares of common stock), after taking into account that such repurchased shares shall become treasury shares and shall no longer be deemed to be outstanding.

        In the event that a person, either alone or together with its related persons, is entitled to vote or cause the voting of shares representing in the aggregate more than 10% (or, in the event that we have completed a public offering of our common stock, 20%) of the total number of votes entitled to be cast on any matter (including if it and its related persons possess this voting power by virtue of agreements entered into with other persons not to vote shares of our capital stock), then such person, either alone or together with its related persons, will not be entitled to vote or cause the voting of these shares of our capital stock to the extent that such shares represent in the aggregate more than 10% (or, in the event that we have completed a public offering of our common stock, 20%) of the total number of votes entitled to be cast on any matter, and we shall disregard any such votes purported to be cast in excess of this percentage.

        The CBOE Holdings board of directors may waive the provisions regarding ownership and voting limits by a resolution expressly permitting this ownership or voting (which resolution must be filed with and approved by the SEC prior to being effective), subject to a determination of the board that:

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        In making these determinations, our board of directors may impose conditions and restrictions on the relevant stockholder or its related persons that it deems necessary, appropriate or desirable in furtherance of the objectives of the Exchange Act and the governance of CBOE Holdings.

        The voting limitation does not apply to a solicitation of a revocable proxy by us or by our directors or officers on our behalf or to a solicitation of a revocable proxy by a stockholder in accordance with Regulation 14A under the Exchange Act. This exception, however, does not apply to a solicitation by a stockholder pursuant to Rule 14a-2(b)(2) under the Exchange Act, which permits a solicitation made otherwise than on behalf of CBOE Holdings where the total number of persons solicited is not more than 10.

        The CBOE Holdings certificate of incorporation also provides that the CBOE Holdings board of directors has the right to require any person and its related persons that our board of directors reasonably believes to be subject to the voting or ownership restrictions summarized above, and any stockholder (including related persons) that at any time beneficially owns 5% or more of our then outstanding capital stock entitled to vote on any matter (and has not reported that ownership to us), to provide to us complete information as to all shares of our capital stock that such stockholder beneficially owns, as well as any other information relating to the applicability to such stockholder of the voting and ownership requirements outlined above as may reasonably be requested.

Organized Sales

        After the completion of a public offering, CBOE Holdings will have the right to conduct organized sales of the Class A-1 and Class A-2 common stock of CBOE Holdings issued in the restructuring transaction when the transfer restriction period applicable to the Class A-1 and A-2 common stock of CBOE Holdings is scheduled to expire. This right will also apply to the Class B common stock because, following any public offering, the Class B common stock will have been automatically converted to Class A-1 and A-2 common stock pursuant to CBOE Holdings' certificate of incorporation. The purpose of this right is to enable CBOE Holdings to facilitate a more orderly distribution of its common stock into the public market. If CBOE Holdings elects to conduct an organized sale, no shares of the Class A-1 and A-2 common stock of CBOE Holdings for which transfer restrictions are scheduled to lapse or of any other series that is subject to transfer restrictions may be sold during the applicable transfer restriction period, except as part of the organized sale or in a permitted transfer.

        In the event CBOE Holdings elects to conduct an organized sale, it will provide the holders of Class A-1 and Class A-2 common stock of CBOE Holdings with a written notice of election to conduct an organized sale of the Class A-1 or A-2 common stock of CBOE Holdings at least 60 days prior to the next scheduled expiration of an applicable transfer restriction period. Holders of Class A-1 or A-2 common stock of CBOE Holdings will have 20 days following receipt of that notice to provide CBOE Holdings with written notice of their intent to participate in the organized sale with respect to the series whose restrictions are scheduled to expire, any other series that remain subject to transfer restrictions and any unrestricted common stock of CBOE Holdings. The written notice must specify the class common stock of CBOE Holdings and the number of shares thereof and the number of shares of unrestricted common stock of CBOE Holdings that the holder has elected to include in the applicable

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organized sale. If such holders do not provide written notice to CBOE Holdings during that 20-day period, they will be deemed to have elected not to include any shares in the organized sale.

        The actual number of shares that may be sold in an organized sale will depend on, among other things, the number of primary shares the board of directors of CBOE Holdings determines that CBOE Holdings will offer for its own account, market conditions, investor demand and the requirements of any underwriters or placement agents and may be fewer than the aggregate number requested by stockholders to be included in the organized sale. In such event, there will be a reduction in the number of shares that each individual holder may sell based on a cut-back formula to be adopted by the board of directors of CBOE Holdings. In the event of a "cut-back," priority will be given first to shares of the series next scheduled to be released, second to shares of a series scheduled to be released from transfer restrictions at a later date and finally to unrestricted common stock of CBOE Holdings. The organized sale may take the form of an underwritten secondary offering, a private placement of unrestricted common stock to one or more purchasers, a repurchase of Class A-1 or A-2 common stock by CBOE Holdings or a similar process selected by the board of directors of CBOE Holdings. The stockholders' right to participate in an organized sale will be contingent upon the execution of all agreements, documents and instruments required to effect such sale, including, if applicable, an underwriting agreement and payment of their share of the fees, expenses, commission and other related costs.

        CBOE Holdings may proceed with the sale of fewer than all of the shares that have been requested to be included in an organized sale, including less than all of the shares of the series scheduled for release at the expiration of the related transfer restriction period. Additionally, CBOE Holdings will be under no obligation to complete the organized sale.

        If less than all of the shares of the series scheduled to be released that a stockholder requests be sold in the related organized sale are sold in such organized sale or the stockholder elects not to include all of the shares of the series scheduled for release in the applicable organized sale, the stockholder will be able to sell, on the 91st day after the later of the expiration of the related transfer restriction period and the completion of the organized sale, any of those shares that were not sold or included (i.e., such shares will automatically convert into unrestricted shares of common stock of CBOE Holdings on such date).

        If CBOE Holdings elects to conduct an organized sale in connection with the conversion of the Class A-1 common stock and does not complete such organized sale before 60 days after the expiration date with respect to the transfer restrictions on the Class A-1 common stock, the shares of the Class A-1 common stock will convert into unrestricted common stock of CBOE Holdings on the 61st day after the original expiration date for such class.

        However, if CBOE Holdings elects to conduct an organized sale undertaken in conjunction with the scheduled expiration of transfer restrictions applicable to the Class A-2 common stock of CBOE Holdings and CBOE Holdings does not complete such organized sale before the 360th day following the initial public offering, the Class A-2 common stock shall automatically convert into unrestricted common stock of CBOE Holdings on the 361st day following the initial public offering.

        If CBOE Holdings does not elect to conduct an organized sale at the time of any scheduled expiration of transfer restriction applicable to a series of Class A common stock of CBOE Holdings, the shares of that series for which transfer restrictions are scheduled to expire will automatically convert into unrestricted common stock of CBOE Holdings at the expiration of the applicable transfer restriction period and be freely transferable at that time.

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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
OF THE RESTRUCTURING TRANSACTION

Material U.S. Federal Income Tax Consequences To U.S. Holders Of CBOE Seats

        Subject to the limitations and qualifications described herein, the following discussion constitutes the opinion of Schiff Hardin LLP, counsel to the CBOE, as to the material U.S. federal income tax consequences of the Merger to U.S. holders of CBOE Seats. We refer to this transaction as the "Merger." This discussion is based on current provisions of the Internal Revenue Code, final, temporary or proposed U.S. Treasury regulations promulgated under the Internal Revenue Code, judicial opinions, published positions of the Internal Revenue Service and all other applicable authorities, all of which are subject to change (possibly with retroactive effect).

        The Participating Group A Settlement Class Members and Participating Group B Settlement Class Members will not receive any consideration in the restructuring transaction or in the Merger. The settlement consideration to be paid to the Participating Group A Settlement Class Members and the Participating Group B Settlement Class Members pursuant to the Settlement Agreement will be paid only after the Merger effecting the restructuring transaction is complete. As a result, the following discussion does not include an analysis of, and Schiff Hardin LLP does not provide any opinion with respect to, the U.S. federal income tax consequences of the Settlement Agreement or the consideration to be paid to Participating Group A Settlement Class Members or Participating Group B Settlement Class Members under the Settlement Agreement. This discussion and the opinion of Schiff Hardin, LLP is limited to the material U.S. tax consequences of the Merger to U.S. Holders of CBOE Seats.

        For purposes of this discussion, the term "U.S. holder" means:

        If an entity that is treated as a partnership for U.S. federal income tax purposes holds CBOE Seats, the tax treatment of a partner in this partnership generally will depend on the status of the partners and the activities of the partnership. If you are a partner in a partnership holding CBOE Seats, you should consult your tax advisor. This discussion only addresses holders of CBOE Seats that hold their CBOE Seats as a capital asset within the meaning of Section 1221 of the Internal Revenue Code. Further, this summary does not address all aspects of U.S. federal income taxation that may be relevant to a holder in light of the holder's particular circumstances or that may be applicable to holders subject to special treatment under U.S. federal income tax law (including, for example, persons that are not U.S. persons, financial institutions, dealers in securities, insurance companies, tax-exempt entities, partnerships or other pass-through entities, holders subject to the alternative minimum tax provisions of the Internal Revenue Code, persons whose functional currency is not the U.S. dollar, and holders who hold their CBOE Seats as part of a hedge, straddle, constructive sale or conversion transaction). In addition, no information is provided herein with respect to the tax consequences of the Merger under applicable state, local or non-U.S. laws or federal laws other than those pertaining to the federal income tax.

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        ALL HOLDERS ARE URGED TO CONSULT WITH THEIR TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF THE MERGER TO THEM, INCLUDING THE EFFECTS OF U.S. FEDERAL, STATE AND LOCAL, FOREIGN AND OTHER TAX LAWS.

Conditions to Closing

        It is a condition to the obligation of the CBOE to consummate the Merger that it receives an opinion from its counsel, Schiff Hardin LLP, dated as of the closing date of the Merger, to the effect that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code. The opinion will be based on assumptions and representations set forth or referred to in the opinion. An opinion of counsel represents counsel's best legal judgment and is not binding on the Internal Revenue Service or any court. Accordingly, there can be no assurances that the Internal Revenue Service will not disagree with or challenge any of the conclusions described in the following discussion.

The Merger

        The U.S. federal income tax consequences of the Merger to U.S. holders of CBOE Seats are as follows:

        A holder of a CBOE Seats will not recognize gain or loss upon receipt of CBOE Holdings Class A common stock solely in exchange for the holder's CBOE Seat. The aggregate tax basis of the shares of CBOE Holdings common stock received will be equal to the tax basis in the CBOE Seat exchanged. The holding period of the CBOE Holdings common stock received will include the holding period of the CBOE Seat exchanged.

Backup Withholding and Information Reporting

        Payments of cash made in connection with the mergers may, under certain circumstances, be subject to information reporting and "backup withholding" at a rate of 28%, unless a holder of a CBOE Seat provides proof of an applicable exemption or furnishes its taxpayer identification number, and otherwise complies with all applicable requirements of the backup withholding rules. Any amounts withheld from payments to a holder under the backup withholding rules are not additional tax and will be allowed as a refund or credit against the holder's federal income tax liability, provided the required information is furnished to the Internal Revenue Service.

U.S. Federal Income Tax Considerations for Non-U.S. Holders of CBOE Holdings Common Stock

        Subject to the limitations and qualifications described herein, the following discussion constitutes the opinion of Schiff Hardin LLP, counsel to the CBOE, as to the material U.S. federal income tax considerations with respect to the ownership and disposition of shares of CBOE Holdings common stock applicable to non-U.S. holders. This discussion is based on current provisions of the Internal Revenue Code, final temporary or proposed U.S. Treasury regulations promulgated under the Internal Revenue Code, judicial opinions, published positions of the Internal Revenue Service and all other applicable authorities, all of which are subject to change (possibly with retroactive effect). In general, a "non-U.S. holder" is any holder other than:

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        This discussion is based on current provisions of the Internal Revenue Code, final, temporary or proposed U.S. Treasury regulations promulgated thereunder, judicial opinions, published positions of the Internal Revenue Service and all other applicable authorities, all of which are subject to change (possibly with retroactive effect). We assume in this discussion that a non-U.S. holder holds shares of CBOE Holdings common stock as a capital asset within the meaning of Section 1221 of the Internal Revenue Code (generally property held for investment). This discussion does not address all aspects of U.S. federal income taxation that may be important to a particular non-U.S. holder in light of that non-U.S. holder's individual circumstances. In addition, except to the extent provided below, this discussion does not address federal tax laws other than those pertaining to the federal income tax, nor does it address any aspects of U.S. state, local or non-U.S. taxes. This discussion also does not consider any specific facts or circumstances that may apply to a non-U.S. holder subject to special treatment under the U.S. federal income tax laws (such as insurance companies, tax-exempt organizations, controlled foreign corporations, financial institutions, brokers, dealers in securities, partnerships or other pass-through entities, owners of 5% or more of our common stock and certain U.S. expatriates). Accordingly, we urge prospective non-U.S. holders of shares of CBOE Holdings common stock to consult with their own tax advisors regarding the U.S. federal, state, local and non-U.S. income and other tax considerations of acquiring, holding and disposing of shares of CBOE Holdings common stock.

Dividends

        In general, dividends, if any, paid by CBOE Holdings to a non-U.S. holder will be subject to U.S. withholding tax at a rate of 30% of the gross amount (or a reduced rate prescribed by an applicable income tax treaty), unless the dividends are effectively connected with a trade or business carried on by the non-U.S. holder within the United States or, if a treaty applies, are attributable to a permanent establishment of the non-U.S. holder within the United States. Dividends effectively connected with this U.S. trade or business, and, if a treaty applies, attributable to such a permanent establishment of a non-U.S. holder, generally will not be subject to U.S. withholding tax if the non-U.S. holder files certain forms, including Internal Revenue Service Form W-8ECI (or any successor form), with the payor of the dividend, and generally will be subject to U.S. federal income tax on a net income basis, in the same manner as if the non-U.S. holder were a resident of the United States. A non-U.S. holder that is a corporation may be subject to an additional "branch profits tax" at a rate of 30% (or a reduced rate as may be specified by an applicable income tax treaty) on the repatriation from the United States of its "effectively connected earnings and profits," subject to certain adjustments. Under applicable U.S. Treasury regulations, a non-U.S. holder (including, in certain cases of non-U.S. holders that are entities, the owner or owners of these entities) is required to satisfy certain certification requirements in order to claim a reduced rate of withholding pursuant to an applicable income tax treaty.

Gain on Sale or Other Disposition of CBOE Holdings Common Stock

        In general, a non-U.S. holder will not be subject to U.S. federal income tax on any gain realized upon the sale or other disposition of the holder's shares of CBOE Holdings common stock unless:

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U.S. Federal Estate Tax

        Shares of CBOE Holdings common stock that are owned or treated as owned by an individual who is not a citizen or resident (as defined for U.S. federal estate tax purposes) of the United States at the time of death will be includible in the individual's gross estate for U.S. federal estate tax purposes, unless an applicable estate tax treaty provides otherwise, and therefore may be subject to U.S. federal estate tax.

Backup Withholding, Information Reporting and Other Reporting Requirements

        Generally, CBOE Holdings must report annually to the Internal Revenue Service and to each non-U.S. holder the amount of dividends paid to, and the tax withheld with respect to, each non-U.S. holder. These reporting requirements apply regardless of whether withholding was reduced or eliminated by an applicable tax treaty.

        Copies of this information also may be made available under the provisions of a specific treaty or agreement with the tax authorities in the country in which the non-U.S. holder resides or is established.

        U.S. backup withholding tax (currently at a rate of 28%) is imposed on certain payments to persons that fail to furnish the information required under the U.S. information reporting requirements.

        Under U.S. Treasury regulations, the payment of proceeds from the disposition of shares of CBOE Holdings common stock by a non-U.S. holder made to or through a U.S. office of a broker generally will be subject to information reporting and backup withholding, unless the beneficial owner, under penalties of perjury, certifies, among other things, its status as a non-U.S. holder or otherwise establishes an exemption. The payment of proceeds from the disposition of shares of CBOE Holdings common stock by a non-U.S. holder made to or through a non-U.S. office of a broker generally will not be subject to backup withholding and information reporting, except as noted below. In the case of proceeds from a disposition of shares of CBOE Holdings common stock by a non-U.S. holder made to or through a non-U.S. office of a broker that is:

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information reporting (but not backup withholding) will apply unless the broker has documentary evidence in its files that the owner is a non-U.S. holder and certain other conditions are satisfied, or the beneficial owner otherwise establishes an exemption (and the broker has no actual knowledge (or reason to know) to the contrary).

        Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment to a non-U.S. holder can be refunded or credited against the non-U.S. holder's U.S. federal income tax liability, if any, provided that the required information is furnished to the Internal Revenue Service in a timely manner.

        The foregoing discussion of certain U.S. federal income tax considerations is for general information only and is not tax advice. Accordingly, each prospective non-U.S. holder of shares of CBOE Holdings common stock should consult his, her or its own tax adviser with respect to the federal, state, local and foreign tax consequences of the acquisition, ownership and disposition of CBOE Holdings common stock.

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COMPARISON OF RIGHTS PRIOR TO AND AFTER THE RESTRUCTURING TRANSACTION

        This section describes the material differences between the rights of holders of CBOE Seats prior to the restructuring transaction and the rights of holders of CBOE Holdings common stock after the restructuring transaction. If the restructuring transaction occurs, an owner of a CBOE Seat will give up his or her ownership in the CBOE, a Delaware non-stock, membership corporation, and become a stockholder of CBOE Holdings, a Delaware stock, for-profit holding company. As a result of the merger required to effect the restructuring, the CBOE will become a stock corporation and will be solely owned by CBOE Holdings. The common stock of CBOE Holdings that former holders of CBOE Seats will receive in the restructuring transaction will carry different rights than a CBOE Seat currently has.

        As part of approving the restructuring transaction, you will effectively be approving amendments to the CBOE's certificate of incorporation, Constitution and Rules, including the bylaws, which will become effective following the merger. These amendments will include technical amendments to the CBOE's current certificate of incorporation, Constitution and Rules, including the bylaws, to reflect differences in the corporation law applicable to the different types of organizations, such as non-stock vs. stock corporations as well as substantive amendments to eliminate reference to the Exercise Right and to revise our corporate and governance structure. In addition, as part of approving the restructuring transaction, you will be approving the certificate of incorporation and bylaws for CBOE Holdings. While the certificate of incorporation and bylaws of CBOE Holdings became effective prior to the time the merger becomes effective, the changes to the CBOE's certificate of incorporation, Constitution and Rules, including the bylaws, will become effective at the time the merger becomes effective.

        As part of the restructuring transaction, CBOE members will no longer have access rights to the CBOE's trading floor and other facilities as a part of their ownership interest in the CBOE. Rather members will have the opportunity to obtain trading permits that will entitle them to have access to the CBOE's trading facilities. Trading access will be separate from the former member's stock ownership. The right to trading access will be subject to dues and fees and will be subject to the suspension and termination rules comparable to those that currently apply to CBOE Seats. For more information on the terms and restrictions relating to trading access, please see "The Restructuring Transaction—Trading Permits" above.

        Owners of CBOE Seats should carefully consider the differences in the rights and obligations that will result from these changes in corporate structure before voting on the restructuring transaction.

        This section does not include a complete description of all differences among the rights of the CBOE members and the CBOE Holdings stockholders, nor does it include a complete description of their specific rights. Furthermore, the identification of some of the differences in these rights as material is not intended to indicate that other differences that may be equally important do not exist. All CBOE members are urged to read carefully the relevant provisions of the Delaware General Corporation Law, as well as the proposed forms of the CBOE amended and restated certificate of incorporation and bylaws (which forms are included as Annexes E and F, respectively, to this proxy statement and prospectus) and the form of CBOE Holdings amended and restated certificate of incorporation and bylaws that will be in effect upon completion of the restructuring transaction (which forms are included as Annexes C and D, respectively, to this proxy statement and prospectus).

        Copies of the current CBOE certificate of incorporation, Constitution and Rules are available to CBOE members at CBOE's website at www.CBOE.com or will be provided to you upon request. See "Where You Can Find More Information."

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Equity Interests


Before the Restructuring Transaction
  After the Restructuring Transaction


CBOE:
•  The CBOE is a non-stock corporation without the authority to issue capital stock.

•  The CBOE is authorized to issue CBOE memberships subject to board and membership approval. There are 930 CBOE Seats outstanding.

 

CBOE Holdings:
•  
Common Stock. CBOE Holdings will be authorized to issue up to (i)             shares of unrestricted common stock, par value $0.01 per share, (ii)             shares of Class A common stock, par value $0.01 per share, (iii)               shares of Class A-1 common stock, $0.01 par value per share, (iv)              shares of Class A-2 common stock, $0.01 par value per share, and (v) up to             shares of Class B common stock, par value $0.01 per share. Immediately following the restructuring transaction, CBOE Holdings expects there to be approximately             shares of CBOE Holdings Class A common stock issued and outstanding,              shares of CBOE Holdings Class B common stock issued and outstanding and no unrestricted common stock issued and outstanding. The remaining authorized but unissued shares of common stock will be available for possible future issuance.

•  
Preferred Stock. As of the effective time of the restructuring transaction, CBOE Holdings will be authorized to issue up to 20,000,000 shares of preferred stock, par value $0.01 per share. CBOE Holdings expects that no shares of preferred stock will be issued or outstanding immediately following completion of the restructuring transaction.

CBOE:
•  The CBOE will have the authority to issue a total of 1,000 shares of common stock, all of which will be issued and outstanding and owned by CBOE Holdings immediately following the restructuring transaction.

161



Ownership and Transfer of Equity Interests


Before the Restructuring Transaction
  After the Restructuring Transaction


CBOE:
•  Except as provided below, owners of CBOE Seats must transfer their seat pursuant to specified rules, including that any offer to sell must be submitted to CBOE's Membership Department and that any offers will be matched with bids by the CBOE's Membership Department as provided in the CBOE's Rules.

•  Owners of CBOE Seats may transfer their membership (i) to their spouse, brother, sister, parent, child, grandparent, or grandchild, (ii) to a successor entity of the transferring member, (iii) to an organization in which the transferring member will maintain an interest at least equal in value to the current market price of the membership or (iv) an individual or organization which is a partner or shareholder with a 50% or greater interest in the transferring member as part or all of a distribution of the transferor, in each case only if the transferee is approved as a member of the CBOE.

•  No individual CBOE member may own or have registered for it more memberships than are reasonably necessary to carry on that member's CBOE activities.

 

CBOE Holdings
•  Interim Transfer Restrictions. Following the restructuring transaction and prior to any public offering, (i) transfers of shares Class A and Class B common stock may only take place through the agent designated by CBOE Holdings and through the broker or market designated by CBOE Holdings as the sole broker or market for such transfer, and (ii) if the CBOE Holdings board of directors determines to proceed with a public offering, the board may institute the lock-up restrictions provided in CBOE Holdings' certificate of incorporation with respect to the Class A and Class B common stock by issuing a press release to the effect that such transfer restrictions will commence on a date no earlier than 10 calendar days following the date of such announcement. If such an announcement is made, the Class A and Class B common stock shall remain subject to transfer restrictions until such shares are converted into shares of Class A-1 and A-2 common stock at the time of the closing of any such public offering.

•  IPO Lock-Up Restrictions. In the event CBOE Holdings engages in a public offering, the Class A and Class B common stock of CBOE Holdings automatically would be converted, effective at the time of the closing of such public offering, into shares of Class A-1 and Class A-2 common stock, which will be issued subject to "lock-up restrictions" under CBOE Holdings' certificate of incorporation. The lock-up restrictions would expire with respect to the Class A-1 and Class A-2 common stock on the 180th and 360th day, respectively, following the closing date of the public offering.

•  Subject to certain exceptions, during any applicable lock-up period, shares of CBOE Holdings common stock may not be directly or indirectly assigned, offered for sale, sold, transferred or otherwise disposed of. For a list of the applicable exceptions, please see "Description of CBOE Holdings Capital Stock—Transfer Restrictions on the Class A, Class A-1, Class A-2 and Class B Common Stock of CBOE Holdings" above.

•  The board of directors of CBOE Holdings may remove the transfer restrictions, in whole or part, at any time in its sole discretion.

162



Ownership and Transfer of Equity Interests


Before the Restructuring Transaction
  After the Restructuring Transaction



 


 


CBOE Holdings
•  No person, together with its related persons, may own, directly or indirectly, more than 10% of the outstanding shares of common stock of CBOE Holdings; provided that, following a public offering of CBOE Holdings common stock, if any, this limit would increase to 20%.

•  If any sale or transfer of shares in violation of the above restrictions occurs, then CBOE Holdings shall have the right to repurchase such shares at their par value.

•  All shares of Class A, Class B, Class A-1 and Class A-2 common stock must be registered in the name of the owner and may not be registered in the name of any nominee or broker.

CBOE:
•  All shares of the CBOE common stock will be issued to and owned by CBOE Holdings.

163



Voting Rights