The Chicago Board Options Exchange, the largest U.S. options market, on Monday said that its second-quarter profit after taxes rose 36 percent, driven by increased volume and expanded product offerings.
The CBOE, which has been operating as a for-profit business model, has reported double-digit growth for 10 consecutive quarters.
The exchange is now in the process of working out a long-standing legal dispute over trading rights with former Chicago Board of Trade members, now part of CME Group Inc.
The resolution of that dispute would open the way for CBOE to complete its transformation into a for-profit, shareholder company from a member-owned organization, and a possible initial public offering.
Earnings after taxes for the second quarter rose to $25.4 million from $18.7 million a year earlier. Before taxes, quarterly profits were $43.9 million, compared with $32.2 million during the same period a year ago, the exchange said.
Fueled by higher trading volume, quarterly revenues grew 15 percent to $97.6 million from $84.6 million a year earlier.
"Strong growth across our product lines during the quarter pushed CBOE's total revenues and income up by double digits," said CBOE Chairman and Chief Executive William Brodsky in a statement.
"Both new and existing products were in place to meet the risk-management needs of market participants during some difficult market conditions," Brodsky added.
"Today the CBOE reported some pretty eye-popping financial results," said Jon Najarian, a founder of Web information site optionmonster.com. Through various investment vehicles Najarian owns a seat on the CBOE.
"The transparency offered by listed options and futures exchanges is clearly in greater demand and once you get the critical mass moving in a direction, it is difficult to stop it," Najarian said.
Average daily volume at the CBOE during the second quarter was 4.3 million contracts, compared with 3.5 million contracts during the period in 2007.
Total trading volume during the second quarter stood at 275.2 million contracts, up from 220.4 million contracts during last year's second quarter.
On June 3, CBOE launched options trading on the SPDR Gold Trust, an exchange-traded fund. In June, nearly 250,000 option contracts traded in the ETF at the exchange, representing 50 percent of all industry trading in the product, CBOE said.
Quarterly expenses totaled $53.7 million compared to $52.4 million in the same year ago quarter. The rise in second-quarter expenses was due mainly to increases in outside services, royalty fees for licensed products and other expenses, offset partially by lower employee costs as compared to second quarter 2007, CBOE said.
In a sign of CBOE's worth in equity, CBOE membership prices hit two all-time highs last month -- $3.3 million on June 18, eclipsing a record $3.2-million seat sale one day earlier.
The CBOE earlier this month postponed a membership vote on its tentative settlement of a trading rights dispute with some CBOT members.
The vote was originally scheduled to take place on July 17 but no new date has been chosen, while representatives of both parties continue to work out the terms of the agreement, according to a July 3 circular sent to CBOE members.
The rights date back to when CBOE was spun off by the CBOT in 1973 and allowed CBOT full members to trade options at the CBOE without having to buy a membership. But CBOE contended that those rights were terminated when CME acquired CBOT last year.
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