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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2013
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or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
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Delaware
(State or other jurisdiction of
incorporation or organization)
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20-5446972
(I.R.S. Employer
Identification Number)
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400 South LaSalle Street
Chicago, Illinois
(Address of principal executive offices)
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60605
(Zip Code)
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Title of Each Class
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Name of Exchange on Which Registered
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Unrestricted Common Stock,
par value $0.01 per share
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NASDAQ Global Select Market
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Large accelerated filer
ý
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Accelerated filer
o
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Non-accelerated filer
¨
(Do not check if a
smaller reporting company)
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Smaller reporting company
o
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Documents
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Form 10-K Reference
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Portions of the Company's Proxy Statement for the 2014 Annual Meeting of Stockholders
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Part III
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Page
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•
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"CBOE Holdings," "we," "us," "our" or "the Company" refers to CBOE Holdings, Inc. and its subsidiaries.
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"CBOE" refers to (1) prior to the completion of the restructuring transaction, Chicago Board Options Exchange, Incorporated, a Delaware non-stock corporation, and (2) after the completion of the restructuring transaction, Chicago Board Options Exchange, Incorporated, a Delaware stock corporation. CBOE became a wholly-owned subsidiary of CBOE Holdings, Inc. on June 18, 2010.
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"C2" refers to C2 Options Exchange, Incorporated, a wholly-owned subsidiary of CBOE Holdings, Inc.
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"CFE" refers to CBOE Futures Exchange, LLC, a wholly-owned subsidiary of CBOE Holdings, Inc.
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"CBSX" refers to CBOE Stock Exchange, LLC, a facility of CBOE that is 49.96% owned by CBOE. CBSX wholly owns National Stock Exchange, Inc. ("NSX"), a stock exchange and self-regulatory organization. CBSX is not a consolidated subsidiary of the Company.
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"CFTC" refers to the U.S. Commodity Futures Trading Commission.
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"Consent Order" refers to the Consent order that CBOE and C2 entered into with the SEC on June 11, 2013.
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"Delaware Action" refers to the lawsuit, which was entitled CME Group Inc. et al. v. Chicago Board Options Exchange, Incorporated et al. (Civil Action No. 2369-VCN) and filed in the Delaware Court on August 23, 2006, in which the CBOE and its directors were sued in the Delaware Court by the Board of Trade of the City of Chicago, Inc. ("CBOT"), CBOT Holdings, Inc. and two members of the CBOT who purported to represent a class of individuals who claimed that they were, or had the right to become, members of the CBOE.
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"Member" or "Members" refers to, prior to the completion of the restructuring transaction, any person or organization (or any designee of any organization) that held a membership in the CBOE.
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"Our exchanges" refers to CBOE, C2 and CFE.
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Unless the context otherwise requires, references to "industry" or "market" refer to the U.S. exchange-traded options and/or futures industry and market.
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The "restructuring transaction" refers to the transaction on June 18, 2010, in which CBOE converted from a Delaware non-stock corporation owned by its Members to a Delaware stock corporation and a wholly-owned subsidiary of CBOE Holdings.
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"SEC" refers to the U.S. Securities and Exchange Commission.
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"Settlement Agreement" means the Stipulation of Settlement, as amended, approved by the Court of Chancery of the State of Delaware in the Delaware Action.
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"SPX" refers to our S&P 500 Index exchange-traded options products.
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"VIX" refers to the CBOE Volatility Index methodology.
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the loss of our right to exclusively list and trade certain index options and futures products;
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increasing price competition in our industry;
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compliance with legal and regulatory obligations, including our obligations under the SEC Consent Order;
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decreases in the amount of trading volumes or a shift in the mix of products traded on our exchanges;
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legislative or regulatory changes;
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increasing competition by foreign and domestic entities;
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our ability to operate our business without violating the intellectual property rights of others and the costs associated with protecting our intellectual property rights;
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our ability to accommodate trading volume and order transaction traffic, including increases in trading volume and order transaction traffic, without failure or degradation of performance of our systems;
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our ability to protect our systems and communication networks from security risks, including cyber-attacks;
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economic, political and market conditions;
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our ability to maintain access fee revenues;
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our ability to meet our compliance obligations, including managing potential conflicts between our regulatory responsibilities and our for-profit status;
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our ability to attract and retain skilled management and other personnel;
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our ability to manage our growth effectively;
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our dependence on third party service providers; and
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the ability of our compliance and risk management methods to effectively monitor and manage our risks.
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Annual Contract Volume
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2013
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2012
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2011
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2010
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2009
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Equities
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433,777,204
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494,289,301
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516,136,937
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572,688,137
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634,710,477
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Indexes
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372,647,443
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304,339,908
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320,389,993
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269,989,511
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222,787,514
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Exchange-traded products
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341,023,209
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311,792,122
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368,364,057
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276,362,700
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277,266,218
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Total Options Volume
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1,147,447,856
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1,110,421,331
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1,204,890,987
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1,119,040,348
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1,134,764,209
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Futures
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40,193,447
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23,892,931
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12,041,102
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4,402,378
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1,155,318
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Total Contract Volume
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1,187,641,303
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1,134,314,262
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1,216,932,089
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1,123,442,726
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1,135,919,527
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•
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Leading Brand, Reputation and Market Position.
As the original and largest U.S. options exchange, based on both contract volume and notional value and one of the largest options exchanges in the world, we have a leading brand and reputation. Our opinions and positions on industry issues are sought worldwide.
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Innovative Products.
We work closely and collaboratively with market participants to introduce new products and services to meet the evolving needs of the derivatives industry, including index options, options and futures on the VIX Index and other volatility indexes, Long-Term Equity Anticipation Securities ("LEAPS"), short duration options, including Weeklys, FLEX options and options strategy benchmark indexes.
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Strategic Relationships.
As described in more detail below, we have entered into licensing agreements with index providers under which we have rights to create volatility indexes and offer options and futures products on their indexes. See "Strategic Relationships."
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Proprietary Technology.
We own, operate and maintain our core trading and information technology and system, which supports both screen and floor-based trading for multiple trading models, products and matching algorithms. We also offer our Hybrid trading model on CBOE, which integrates open outcry and electronic trading into a single exchange. This offers our users a diverse pool of liquidity and the ability to execute complex strategies that may not be available on purely screen-based trading systems.
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Experienced Management Team.
Our management team has extensive experience in the options industry, with the members of the senior management team having an average of over 25 years of experience in the options industry. In May 2013, William J. Brodsky, our former Chairman and Chief Executive Officer, became Executive Chairman, Edward T. Tilly assumed the position of Chief Executive Officer after being President and Chief Operating Officer, and Edward L. Provost assuming the title of President and Chief Operating Officer after serving as our Executive Vice President and Chief Business Development Officer. Our ability to promote from within demonstrates the talent and depth among senior management at our Company.
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Develop Innovative Proprietary Products.
We intend to use licensed products and proprietary intellectual property to create proprietary products that meet the needs of the derivatives industry, both through strategic relationships and internally developed products. Specifically, we are working to increase product offerings using the proprietary VIX methodology. In 2013, we introduced options and futures on the CBOE Russell 2000 Volatility Index, and on February 13, 2014, we introduced futures on the CBOE Short-Term Volatility Index. We plan to introduce options on the CBOE Short-Term Volatility Index later in 2014 pending regulatory approval. We anticipate that our new and innovative products will help drive trading volumes by attracting new customers to our exchanges. In addition, we believe our continuing product innovations will generate increased use of our other products, in the same way that volatility products on the S&P 500 and the CBOE S&P 500 BuyWrite Index have generated additional trading activity in SPX options.
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Pursue International Opportunities.
In 2013, we opened a London hub to provide European firms with a cost-efficient way to send and receive CFE data and execute trades on the exchange. We also extended the trading hours in VIX futures to allow for a post-settlement trading period (from 3:30-4:15 p.m. CT) and to coincide with European trading hours (2 -7 a.m. CT). The 2-7 am extended trading session is designed to accommodate European firms that want to establish or offset VIX Index futures positions.
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Offer Compelling Economic Market Model.
Our fee schedule provides benefits to market participants who concentrate their overall trading activity on CBOE. We believe that our fee structure encourages market participants to increase their business at CBOE by reducing the per contract fee or increasing per contract incentives based on the attainment of certain monthly volume thresholds. CBOE has a Volume Incentive Program ("VIP") that provides payments to firms that execute volume in excess of certain volume thresholds. In February 2013, we introduced an innovative pricing model on C2 that bases fees and rebates for equity options on the spread between bids and offers, or market width. We continue to enhance the offering and educate our customers about its benefits. We regularly review and update our fee schedule to provide an industry-leading economic offering.
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Continue to Enhance Our Trading Platform.
We recognize that the opportunity to participate in the growth of the derivatives market will be driven in great part by the trading functionality and systems capabilities that an exchange offers to market participants. We intend to use our strong in-house development capabilities and continued investment to further harden and augment the functionality and capacity of our trading systems.
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Increase the Number of Users of Our Products.
We are committed to increasing the number of users who trade our products. Specifically, we have targeted new institutional investors, including pensions and endowments, to inform about how to trade our products, especially our proprietary products. We intend to continue offering education sessions and published materials through the Options Institute. We also educate potential investors through our domestic and European Risk Management Conferences and through participation in industry events. We plan to continue these activities and look for other opportunities to grow the user base for our products.
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Attract Over-the-Counter Market Participants.
We seek to attract participants from the over-the-counter market, including through our customizable FLEX options products and through offering products similar to those traded over-the-counter.
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Pursue Select Strategic Opportunities.
We evaluate strategic opportunities that we believe will enhance stockholder value. We specifically look for strategic opportunities beyond our current businesses that will capitalize on our core competencies and diversify our sources of revenue.
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Index Options.
We offer trading in options on several different broad-based market indexes, including the VIX Index, a proprietary index that we developed, which has become a widely recognized measure of equity market volatility. The index options we list include some of the most widely recognized measures of the U.S. equities market, such as the S&P 500, the Dow Jones Industrial Average ("DJIA"), the NASDAQ 100 and the Russell 2000.
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Equity Options.
We offer trading in options with terms of up to nine months on the stocks of approximately 3,000 corporations. The stocks underlying our individual equity options are listed on equity exchanges.
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Options on ETPs.
We offer trading in options on over 500 ETFs and ETNs based on various domestic and foreign market indexes, as well as on volatility, commodities, currencies and fixed income instruments.
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Futures.
We provide a marketplace for trading nine futures products through our wholly-owned subsidiary, CFE. To date, CFE has focused on the trading of futures using the CBOE-created VIX methodology, but also provides trading in S&P 500 Variance futures.
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S&P 500 and S&P 100 Indexes.
We have the exclusive right to offer options contracts on the S&P 500 Index and the S&P 100 Index as a result of a licensing arrangement with S&P OPCO LLC, which was extended in March 2013. Our license with S&P OPCO LLC is through December 31, 2033, with an exclusive license to trade options on the S&P 500 Index through Decmber 31, 2032. We are also authorized to use the S&P 500 Index and S&P 100 for the creation of CBOE volatility indexes, such as VIX, and tradable products on those volatility indexes.
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DJIA.
We have the exclusive right during standard US trading hours to offer options contracts on the Dow Jones Industrial Average ("DJIA") and certain other Dow Jones indexes through December 31, 2017 as a result of a licensing arrangement with S&P Dow Jones Indices, LLC. We are also authorized to use these indexes to create CBOE volatility indexes and trade options, futures and other products on these indexes.
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Russell Indexes.
We are able to offer options contracts on the Russell 2000 and certain other Russell indexes through December 31, 2013 as a result of a licensing arrangement with Frank Russell Co. We are also authorized to create RVX, a volatility index based on the Russell 2000, and offer options, futures and other products for trading on this index.
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NASDAQ 100.
We have a non-exclusive right to offer options contracts on the NASDAQ 100 Index through December 2015 as a result of a licensing arrangement with NASDAQ OMX Group, Inc. Under this license, we were authorized to create VXN, a volatility index on the NASDAQ 100, and offer options, futures or other products on this index.
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Market-Maker Trading Permits (CBOE, C2)
—As discussed in more detail under "Participant Roles," a Market-Maker Trading Permit entitles the holder to act as a market-maker, DPM, eDPM or LMM on the respective exchange, if applicable on such exchange. This permit provides an appointment credit of 1.0 (which is a measure of how many classes the Trading Permit Holder can quote), a quoting and order entry bandwidth allowance, up to three logins and trading floor access. Quoting in all classes listed on CBOE requires a minimum of thirty-three permits and an additional tier appointment must be obtained in order for a market-maker to act as a market-maker in any of SPX options, VIX options or SPXpm options.
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Electronic Access Permit ("EAP") (CBOE, C2)
—The EAP entitles the holder to electronic access to the exchange. The CBOE EAP permit does not provide access to the trading floor. The EAP provides an order entry bandwidth allowance and up to three logins.
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Floor Broker Trading Permit (CBOE)
—The Floor Broker Trading Permit entitles the holder to act as a Floor Broker. This permit provides an order entry bandwidth allowance, up to three logins and trading floor access.
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Market-Maker.
A market-maker engages in trading our products either for its own account or for the account of his or her firm, but does not act as an agent representing orders for customers. A market-maker may operate on the trading floor (CBOE only) or remotely and has certain quoting obligations in its appointed product classes. They are granted margin relief to ensure they can conduct business without requiring excessive amounts of capital. Market-makers must have a relationship with a clearing firm that will hold and guarantee their positions. The majority of trading permits in use on CBOE are used for market making.
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Lead Market-Maker, or LMM.
An LMM is a market-maker that assumes special obligations with respect to providing electronic and/or open outcry quotes for specific options classes at CBOE. Currently, LMMs are utilized in SPX options and S&P 100 Index options, and as open outcry quote providers in certain classes where an off-floor DPM is providing electronic markets only. Other than in SPX, the LMMs receive participation rights in electronic and/or open outcry trading. Participation rights guarantee LMMs a minimum share of each trade for which they are on the best market. In SPX, LMMs do not receive participation rights, and four LMMs are appointed to quote simultaneously each expiration cycle.
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Floor Broker.
An individual who represents orders on the CBOE trading floor as an agent is known as a floor broker. Floor brokers generally do not trade for their own account and do not receive any margin relief. They generate revenue by charging commissions to their customers for their services. A floor broker may represent orders for his firm's proprietary account in accordance with CBOE rules.
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Designated Primary Market-Maker, or DPM.
A DPM is a market-maker firm that has been assigned responsibilities in certain options classes at CBOE. DPMs are obligated to provide continuous quotes in their appointed classes but at a higher standard than that of regular market-makers. DPMs are expected to participate in business development efforts to attract business to CBOE for their appointed classes. DPMs also are granted participation rights in their appointed classes.
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Electronic Designated Primary Market-Maker, or eDPM.
An eDPM is a market-maker on CBOE that has been assigned responsibilities similar to a DPM but only operates remotely, not on the trading floor. They also are granted participation rights in their appointed classes but at a lower level than that of DPMs, reflecting their slightly lesser obligations. eDPMs serve to supplement the role of the DPM and are also motivated to engage in business development efforts in their appointed classes. As of February 3, 2014, CBOE no longer offers the eDPM program.
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Electronic Access Permits.
Firms that do not have any of the specified roles above have electronic access permits. These may include clearing TPHs; TPHs approved to transact business with the public; proprietary TPHs; and order service firm.
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CBOE utilizes varying matching algorithms across its listed options classes, with different combinations of customer priority, participation rights and pro-rata, modified pro-rata or price-time depending on the product.
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C2's matching algorithm is pro-rata for ETP options classes. For equity options classes, the C2 matching algorithm is a price-time matching algorithm with customer priority and DPM participation rights.
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The matching algorithm for VIX futures on CFE is price-time priority. CFE also offers Trade at Settlement ("TAS") transactions in VIX futures, which are aimed at helping traders even out end-of-day price exposure in VIX futures.
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Offering a fee schedule that both attracts order flow and provides incentives to liquidity providers;
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Providing advanced technology that offers broad functionality, low latency, fast execution, ease of use, scalability, reliability and security;
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Offering participants access to a broad array of products and services, including proprietary products;
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Offering market participants an efficient, transparent and liquid marketplace for trading options using traditional open outcry and our electronic platform, CBOE Command;
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Offering customers a deep, liquid market with trading mechanisms to enable potential price improvement;
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Facilitating payment for order flow through the administration of marketing fees;
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Offering market participants potential participation rights for order flow that they direct or cause to be directed to our exchanges; and
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Providing brokers and their customers with a complete source of information on options as well as extensive options education.
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surveillance designed to detect violations of exchange trading rules;
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surveillance designed to detect possible manipulation and violations of other SEC rules;
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the further investigation of matters deemed to be problematic;
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the investigation of complaints about possible rule violations brought by customers, members or other SROs; and
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the examination of CBOE and C2 Trading Permit Holders for compliance with rules such as those related to net capital, books and records, market access and other matters related to the Trading Permit Holders' exchange business function.
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Name
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Age
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Position
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Edward T. Tilly
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50
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Chief Executive Officer
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Edward L. Provost
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61
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President and Chief Operating Officer
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Alan J. Dean
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59
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Executive Vice President, Chief Financial Officer and Treasurer
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Joanne Moffic-Silver
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61
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Executive Vice President, General Counsel and Corporate Secretary
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Gerald T. O'Connell
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62
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Executive Vice President and Chief Information Officer
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David S. Reynolds
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60
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Vice President and Chief Accounting Officer
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a reduction in trading by customers,
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heightened capital requirements,
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regulatory or legislative actions,
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reduced access to capital required to fund trading activities, or
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significant market disruptions.
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respond more quickly to competitive pressures;
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develop products that compete with our products or are preferred by our customers;
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develop and expand their technology and service offerings more efficiently;
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provide better, more user-friendly and more reliable technology;
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take greater advantage of acquisitions, alliances and other opportunities;
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market, promote and sell their products and services more effectively;
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leverage existing relationships with customers and alliance partners more effectively or exploit brand names to market and sell their services; and
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exploit regulatory disparities between traditional, regulated exchanges and alternative markets, including over-the-counter markets, that benefit from a reduced regulatory burden and lower-cost business model.
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unanticipated disruption in service to our participants,
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failures or delays during peak trading times or times of unusual market volatility,
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slower response times and delays in trade execution and processing,
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incomplete or inaccurate accounting, recording or processing of trades, and
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our distribution of inaccurate or untimely market data to participants who rely on this data in their trading activity.
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a loss in transaction or other fees due to the inability to provide services for a time,
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requests by market participants or others that we reimburse them for financial loss, either within the constrains of the limited liability provisions of our exchanges' rules or in excess of those amounts,
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trading to diminish on our exchanges due to dissatisfaction with the platform, and
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our regulators to investigate or take enforcement action against us.
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broad trends in business and finance;
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concerns over inflation and wavering institutional or retail confidence levels;
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changes in government fiscal and monetary policy and foreign currency exchange rates;
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the availability of short-term and long-term funding and capital;
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the availability of alternative investment opportunities;
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changes in the level of trading activity in underlying instruments;
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changes and volatility in the prices of securities;
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the level and volatility of interest rates;
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unforeseen market closures or other disruptions in trading; and
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concerns about terrorism and war.
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prohibiting stockholders from acting by written consent;
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requiring advance notice of director nominations and of business to be brought before a meeting of stockholders;
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requiring the vote of majority of the outstanding shares of common stock to amend the bylaws; and
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limiting the persons who may call special stockholders' meetings.
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restrict any person from voting or causing the voting of shares of stock representing more than 20% of our outstanding voting capital stock; and
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restrict any person from beneficially owning shares of stock representing more than 20% of the outstanding shares of our capital stock.
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Price Range
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Cash
Dividends Declared
per Share
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Calendar Period
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High
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Low
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2012
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First Quarter
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$
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29.56
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$
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24.44
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$
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0.12
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Second Quarter
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28.66
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24.56
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0.12
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Third Quarter
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30.39
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27.40
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0.15
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Fourth Quarter (1)
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30.95
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28.56
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0.90
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2013
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First Quarter
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36.99
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29.74
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0.15
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Second Quarter
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47.13
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35.76
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0.15
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Third Quarter
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51.12
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44.44
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0.18
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Fourth Quarter (2)
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54.79
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44.86
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0.68
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2014
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Through February 10, 2014 (3)
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54.50
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48.22
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0.18
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Period
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Total
Number of Shares Purchased |
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Average
Price Paid per Share |
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Total Number of
Shares Purchased as Part of Publicly Announced Plans or Programs |
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Approximate Dollar Value of Shares that May Yet Be
Purchased Under the Plans or Programs (1) |
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October 1, 2013 – October 31, 2013
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265,200
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$
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47.74
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265,200
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$
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76,629,335
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November 1, 2013 – November 30, 2013
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137,900
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51.15
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137,900
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69,575,586
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December 1, 2013 – December 31, 2013
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223,000
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52.02
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223,000
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|
|
157,975,967
|
|
||
Totals
|
|
626,100
|
|
|
$
|
50.01
|
|
|
626,100
|
|
|
|
||
|
|
|
|
|
|
|
|
|
(1)
|
On August 2, 2011, the Company announced that its board of directors had approved a share repurchase program that authorized the Company to purchase up to $100 million of its outstanding unrestricted common stock. On July 31, 2012, the Company announced that its board of directors had approved the repurchase of an additional $100 million of its outstanding unrestricted common stock. On December 10, 2013, the Company announced that its board of directors had approved the repurchase of an additional $100 million of its outstanding unrestricted common stock. This authorization was in addition to any amount remaining under the August 2011 and July 2012 authorizations. The program permits the Company to purchase shares through a variety of methods, including in the open market or through privately negotiated transactions, in accordance with applicable securities laws. It does not obligate the Company to make any repurchases at any specific time or situation.
|
|
6/15/2010 (1)
|
|
6/30/2010
|
|
9/2010
|
12/2010
|
3/2011
|
6/2011
|
9/2011
|
12/2011
|
3/2012
|
6/2012
|
9/2012
|
12/2012
|
3/2013
|
6/2013
|
9/2013
|
12/2013
|
||||||||||||||
CBOE Holdings, Inc.
|
100
|
|
100.18
|
|
61.97
|
|
70.98
|
|
90.28
|
|
76.97
|
|
76.92
|
|
81.65
|
|
90.13
|
|
88.2
|
|
94.17
|
|
97.25
|
|
122.45
|
|
155.18
|
|
151.06
|
|
175.80
|
|
S&P Midcap 400
|
100
|
|
93.45
|
|
105.70
|
|
119.98
|
|
131.21
|
|
130.25
|
|
104.35
|
|
117.9
|
|
133.81
|
|
127.21
|
|
134.13
|
|
138.97
|
|
157.67
|
|
159.25
|
|
171.26
|
|
185.53
|
|
New Peer Group
|
100
|
|
91.88
|
|
84.1
|
|
101.42
|
|
101.72
|
|
99.42
|
|
88.46
|
|
89.76
|
|
104.27
|
|
98.63
|
|
102.91
|
|
96.83
|
|
122.02
|
|
143.03
|
|
141.63
|
|
164.29
|
|
Old Peer Group
|
100
|
|
92.13
|
|
86.41
|
|
101.77
|
|
105.25
|
|
102.99
|
|
87.3
|
|
90.29
|
|
104.88
|
|
97.68
|
|
100.85
|
|
100.15
|
|
121.24
|
|
142.12
|
|
140.72
|
|
163.24
|
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
||||||||||
|
(In thousands, except per share amounts)
|
||||||||||||||||||
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Total operating revenues (1)
|
$
|
572,050
|
|
|
$
|
512,338
|
|
|
$
|
508,144
|
|
|
$
|
437,104
|
|
|
$
|
426,082
|
|
Total operating expenses
|
286,236
|
|
|
268,241
|
|
|
266,512
|
|
|
269,763
|
|
|
248,497
|
|
|||||
Operating income
|
285,814
|
|
|
244,097
|
|
|
241,632
|
|
|
167,341
|
|
|
177,585
|
|
|||||
Total other expense
|
(2,158
|
)
|
|
(1,546
|
)
|
|
(1,548
|
)
|
|
(2,718
|
)
|
|
(355
|
)
|
|||||
Income before income taxes
|
283,656
|
|
|
242,551
|
|
|
240,084
|
|
|
164,623
|
|
|
177,230
|
|
|||||
Income tax provision
|
107,657
|
|
|
85,156
|
|
|
100,678
|
|
|
65,227
|
|
|
70,779
|
|
|||||
Net income
|
$
|
175,999
|
|
|
$
|
157,395
|
|
|
$
|
139,406
|
|
|
$
|
99,396
|
|
|
$
|
106,451
|
|
Net income allocated to common stockholders
|
$
|
173,863
|
|
|
$
|
155,254
|
|
|
$
|
136,582
|
|
|
$
|
98,166
|
|
|
$
|
106,451
|
|
Net income per share allocated to common stockholders (2)
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
$
|
1.99
|
|
|
$
|
1.78
|
|
|
$
|
1.52
|
|
|
$
|
1.03
|
|
|
$
|
1.17
|
|
Diluted
|
1.99
|
|
|
1.78
|
|
|
1.52
|
|
|
1.03
|
|
|
1.17
|
|
|||||
Cash dividends per share paid on Class A and B Common Stock
|
—
|
|
|
—
|
|
|
—
|
|
|
1.25
|
|
|
—
|
|
|||||
Cash dividends declared per share (3) (4)
|
1.16
|
|
|
1.29
|
|
|
0.44
|
|
|
0.20
|
|
|
—
|
|
|||||
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Total assets
|
$
|
441,589
|
|
|
$
|
338,858
|
|
|
$
|
327,868
|
|
|
$
|
254,112
|
|
|
$
|
571,948
|
|
Total liabilities
|
157,072
|
|
|
99,736
|
|
|
91,598
|
|
|
78,238
|
|
|
383,814
|
|
|||||
Total stockholders'/members' equity
|
284,517
|
|
|
239,122
|
|
|
236,270
|
|
|
175,874
|
|
|
188,134
|
|
|||||
Average daily volume by product (5)
|
|
|
|
|
|
|
|
|
|
||||||||||
Equities
|
1,721
|
|
|
1,977
|
|
|
2,048
|
|
|
2,273
|
|
|
2,519
|
|
|||||
Indexes
|
1,479
|
|
|
1,217
|
|
|
1,271
|
|
|
1,071
|
|
|
884
|
|
|||||
Exchange-traded products
|
1,353
|
|
|
1,247
|
|
|
1,462
|
|
|
1,097
|
|
|
1,100
|
|
|||||
Total options average daily volume
|
4,553
|
|
|
4,441
|
|
|
4,781
|
|
|
4,441
|
|
|
4,503
|
|
|||||
Futures
|
159
|
|
|
96
|
|
|
48
|
|
|
17
|
|
|
5
|
|
|||||
Total average daily volume
|
4,712
|
|
|
4,537
|
|
|
4,829
|
|
|
4,458
|
|
|
4,508
|
|
(1)
|
In December 2009, we recognized as revenue $24.1 million of access fees assessed and collected in 2008 and 2007, which were included in deferred revenue pending the final, non-appealable resolution of the Delaware Action.
|
(2)
|
Net income per share allocated to common stockholders is calculated by dividing net income for each of the periods as if the restructuring transaction had occurred at the beginning of the years ended December 31, 2010 and 2009.
|
(3)
|
On December 11, 2012, the Company's board of directors declared a special cash dividend of $0.75 per share. This was in addition to the quarterly cash dividends which aggregated $0.54 per share for the year ended December 31, 2012.
|
(4)
|
On December 10, 2013, the Company's board of directors declared a special cash dividend of $0.50 per share. This was in addition to the quarterly cash dividends which aggregated $0.66 per share for the year ended December 31, 2013.
|
(5)
|
Average daily volume equals the total contracts traded during the period divided by the number of trading days in the period.
|
•
|
Revenue generated through licensing of VIX products;
|
•
|
Revenue generated through regulatory service agreements with other options exchanges;
|
•
|
Revenue derived from fines assessed for rule violations;
|
•
|
Revenue generated through our order routing cancel fee and position transfer fee;
|
•
|
Revenue associated with advertisements through our corporate web site,
www.cboe.com
;
|
•
|
Revenue generated from courses and seminars offered through CBOE's Options Institute;
|
•
|
Rental of commercial space in the lobby of our building; and
|
•
|
Other sources of revenue.
|
|
2013
|
|
2012
|
|
Inc./(Dec.)
|
|
Percent
Change
|
|||||||
|
(in millions, except per share amounts)
|
|
|
|||||||||||
Total operating revenues
|
$
|
572.1
|
|
|
$
|
512.3
|
|
|
$
|
59.8
|
|
|
11.7
|
%
|
Total operating expenses
|
286.2
|
|
|
268.2
|
|
|
18.0
|
|
|
6.7
|
%
|
|||
Operating income
|
285.9
|
|
|
244.1
|
|
|
41.8
|
|
|
17.1
|
%
|
|||
Total other expense
|
(2.2
|
)
|
|
(1.5
|
)
|
|
0.7
|
|
|
39.6
|
%
|
|||
Income before income taxes
|
283.7
|
|
|
242.6
|
|
|
41.1
|
|
|
16.9
|
%
|
|||
Income tax provision
|
107.7
|
|
|
85.2
|
|
|
22.5
|
|
|
26.4
|
%
|
|||
Net income
|
$
|
176.0
|
|
|
$
|
157.4
|
|
|
$
|
18.6
|
|
|
11.8
|
%
|
Net income allocated to common stockholders
|
$
|
173.9
|
|
|
$
|
155.3
|
|
|
$
|
18.6
|
|
|
12.0
|
%
|
Operating income percentage
|
50.0
|
%
|
|
47.6
|
%
|
|
|
|
|
|
|
|||
Net income percentage
|
30.8
|
%
|
|
30.7
|
%
|
|
|
|
|
|
|
|||
Diluted—net income per share allocated to common stockholders
|
$
|
1.99
|
|
|
$
|
1.78
|
|
|
|
|
|
|
|
•
|
The Company's market share of total options contracts traded on U.S. exchanges was
27.9%
for the year ended
December 31, 2013
compared to
27.8%
for the year ended
December 31, 2012
.
|
•
|
Total operating revenues
increased
due to higher transaction fees, regulatory fees and exchange services and other fees, partially offset by lower access fees.
|
•
|
Total operating expenses increased due to higher employee costs, depreciation and amortization and royalty fees, partially offset by lower data processing, outside services, trading volume incentives and other expense.
|
•
|
Effective January 1, 2013, the Company increased its options regulatory fee rates for CBOE and C2. Effective September 1, 2013, CBOE decreased its options regulatory fee rate and C2 suspended its options regulatory fee rate.
|
•
|
In February 2013 and March 2013, the Company enhanced the Volume Incentive Plan ("VIP") to incent firms to execute qualifying electronic, public customer, multiply-listed volume at CBOE in excess of certain thresholds, with a graduated schedule for higher tiers.
|
•
|
The Company granted restricted shares of stock to certain officers and employees on February 6, 2013. In addition to the amounts recognized in connection with these grants, the Company recorded accelerated stock-based compensation expense totaling of $3.2 million for certain executives due to provisions contained in employment arrangements.
|
•
|
On May 23, 2013, the Company granted shares of restricted stock to the incoming Chief Executive Officer and President and Chief Operating Officer, in connection with their new positions. The grants to the Chief Executive Officer and President and Chief Operating Officer totaled $2.5 million, of which 50% vested upon grant.
|
•
|
The Company recorded accelerated stock-based compensation of $0.8 million to recognize the remaining value of stock grants awarded to employees in its regulatory division who will no longer receive stock-based compensation.
|
|
2013
|
|
2012
|
|
Inc./(Dec.)
|
|
Percent
Change
|
|||||||
|
(in millions)
|
|
|
|||||||||||
Transaction fees
|
$
|
397.2
|
|
|
$
|
357.1
|
|
|
$
|
40.1
|
|
|
11.2
|
%
|
Access fees
|
61.0
|
|
|
64.1
|
|
|
(3.1
|
)
|
|
(4.8
|
)%
|
|||
Exchange services and other fees
|
37.3
|
|
|
31.4
|
|
|
5.9
|
|
|
18.8
|
%
|
|||
Market data fees
|
24.9
|
|
|
24.3
|
|
|
0.6
|
|
|
2.3
|
%
|
|||
Regulatory fees
|
36.7
|
|
|
21.0
|
|
|
15.7
|
|
|
74.5
|
%
|
|||
Other revenue
|
15.0
|
|
|
14.4
|
|
|
0.6
|
|
|
4.3
|
%
|
|||
Total operating revenues
|
$
|
572.1
|
|
|
$
|
512.3
|
|
|
$
|
59.8
|
|
|
11.7
|
%
|
|
2013
|
|
2012
|
|
Inc./(Dec.)
|
|
Percent
Change
|
|||||||
|
(in millions)
|
|
|
|||||||||||
Equities
|
$
|
40.6
|
|
|
$
|
59.6
|
|
|
$
|
(19.0
|
)
|
|
(31.9
|
)%
|
Indexes
|
249.8
|
|
|
204.4
|
|
|
45.4
|
|
|
22.2
|
%
|
|||
Exchange-traded products
|
43.7
|
|
|
55.6
|
|
|
(11.9
|
)
|
|
(21.3
|
)%
|
|||
Total options transaction fees
|
334.1
|
|
|
319.6
|
|
|
14.5
|
|
|
4.5
|
%
|
|||
Futures
|
63.1
|
|
|
37.5
|
|
|
25.6
|
|
|
68.3
|
%
|
|||
Total transaction fees
|
$
|
397.2
|
|
|
$
|
357.1
|
|
|
$
|
40.1
|
|
|
11.2
|
%
|
|
|
2013
|
|
2012
|
|
||
Equities
|
|
36.5
|
%
|
|
43.6
|
%
|
|
Indexes
|
|
31.4
|
%
|
|
26.8
|
%
|
|
Exchange-traded products
|
|
28.7
|
%
|
|
27.5
|
%
|
|
Futures
|
|
3.4
|
%
|
|
2.1
|
%
|
|
Total
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
2013
|
|
2012
|
|
Percent
Change
|
|||||
Equities
|
$
|
0.094
|
|
|
$
|
0.121
|
|
|
(22.3
|
)%
|
Indexes
|
0.670
|
|
|
0.672
|
|
|
(0.3
|
)%
|
||
Exchange-traded products
|
0.128
|
|
|
0.178
|
|
|
(28.1
|
)%
|
||
Total options average revenue per contract
|
0.291
|
|
|
0.288
|
|
|
1.0
|
%
|
||
Futures
|
1.570
|
|
|
1.570
|
|
|
—
|
%
|
||
Total average revenue per contract
|
$
|
0.334
|
|
|
$
|
0.315
|
|
|
6.0
|
%
|
•
|
Product mix—
The increase in the average revenue per contract reflects a shift in the volume mix by product. Index options and futures contracts accounted for
31.4%
and
3.4%
of total trading volume in
2013
, up from
26.8%
and
2.1%
in
2012
, respectively. Index options generated total average revenue per contract of
$0.670
representing the highest options average revenue per contract, while futures contracts generated our highest total average revenue per contract of
$1.570
.
|
•
|
SPX options, VIX options and VIX futures—
For the year ended
December 31, 2013
as compared to the prior year period, the total trading volume in SPX options, VIX options and VIX futures increased by
18.9%
,
29.1%
and
67.9%
, respectively.
|
|
2013
|
|
2012
|
|
Inc./(Dec.)
|
|
Percent
Change
|
|||||||
|
(in millions)
|
|
|
|||||||||||
Employee costs
|
$
|
118.1
|
|
|
$
|
104.2
|
|
|
$
|
13.9
|
|
|
13.3
|
%
|
Depreciation and amortization
|
34.5
|
|
|
31.5
|
|
|
3.0
|
|
|
9.5
|
%
|
|||
Data processing
|
17.9
|
|
|
19.6
|
|
|
(1.7
|
)
|
|
(8.7
|
)%
|
|||
Outside services
|
34.5
|
|
|
36.3
|
|
|
(1.8
|
)
|
|
(5.0
|
)%
|
|||
Royalty fees
|
56.6
|
|
|
46.1
|
|
|
10.5
|
|
|
22.6
|
%
|
|||
Trading volume incentives
|
4.3
|
|
|
6.3
|
|
|
(2.0
|
)
|
|
(30.6
|
)%
|
|||
Travel and promotional expenses
|
9.8
|
|
|
10.0
|
|
|
(0.2
|
)
|
|
(2.0
|
)%
|
|||
Facilities costs
|
5.0
|
|
|
5.0
|
|
|
—
|
|
|
(0.3
|
)%
|
|||
Other expenses
|
5.5
|
|
|
9.2
|
|
|
(3.7
|
)
|
|
(40.0
|
)%
|
|||
Total operating expenses
|
$
|
286.2
|
|
|
$
|
268.2
|
|
|
$
|
18.0
|
|
|
6.7
|
%
|
|
2012
|
|
2011
|
|
Inc./(Dec.)
|
|
Percent
Change
|
|||||||
|
(in millions, except per share amounts)
|
|
|
|||||||||||
Total operating revenues
|
$
|
512.3
|
|
|
$
|
508.1
|
|
|
$
|
4.2
|
|
|
0.8
|
%
|
Total operating expenses
|
268.2
|
|
|
266.5
|
|
|
1.7
|
|
|
0.6
|
%
|
|||
Operating income
|
244.1
|
|
|
241.6
|
|
|
2.5
|
|
|
1.0
|
%
|
|||
Total other expense
|
(1.5
|
)
|
|
(1.5
|
)
|
|
—
|
|
|
—
|
%
|
|||
Income before income taxes
|
242.6
|
|
|
240.1
|
|
|
2.5
|
|
|
1.0
|
%
|
|||
Income tax provision
|
85.2
|
|
|
100.7
|
|
|
(15.5
|
)
|
|
(15.4
|
)%
|
|||
Net income
|
$
|
157.4
|
|
|
$
|
139.4
|
|
|
$
|
18.0
|
|
|
12.9
|
%
|
Net income allocated to common stockholders
|
$
|
155.3
|
|
|
$
|
136.6
|
|
|
$
|
18.7
|
|
|
13.7
|
%
|
Operating income percentage
|
47.6
|
%
|
|
47.5
|
%
|
|
|
|
|
|
|
|||
Net income percentage
|
30.7
|
%
|
|
27.4
|
%
|
|
|
|
|
|
|
|||
Diluted—net income per share allocated to common stockholders
|
$
|
1.78
|
|
|
$
|
1.52
|
|
|
|
|
|
|
|
•
|
The Company's market share of total options contracts traded on U.S. exchanges was
27.8%
for the year ended
December 31, 2012
compared to
26.4%
for the year ended
December 31, 2011
.
|
•
|
Total operating revenues increased due to higher exchange services and other fees, market data fees, regulatory fees and other revenue, partially offset by decreases in transaction fees and access fees.
|
•
|
Total operating expenses increased due to higher outside services and other expenses, partially offset by decreases in depreciation and amortization and trading volume incentives.
|
•
|
On January 3, 2012, the Company implemented several changes to our fee schedule to promote trading in various products. Adjustments were made to liquidity provider sliding scales, effectively decreasing per contract fees on multiply-listed options products and increasing per contract fees on proprietary products. For Clearing Trading Permit Holders that are proprietary firms, a single, fixed transaction fee for non-paired orders in products other than our proprietary options products was established. And, in an effort to increase our market share, we implemented a volume incentive program ("VIP") to reward firms who execute qualifying electronic, public customer, multiply-listed volume at CBOE in excess of certain thresholds, with a graduated schedule for higher tiers.
|
•
|
In addition to transaction fee changes, on January 3, 2012, we implemented fee adjustments for market-maker trading permits, which resulted in lower access fees, and we increased our exchange services and other fees for Trading Permit Holders.
|
•
|
Effective August 1, 2012, CBOE increased its options regulatory fee rate and C2 implemented an options regulatory fee. The increase in the options regulatory fee is reflected in "Regulatory Fees" in the consolidated statements of income.
|
•
|
Other expenses include the impact of an expense accrual of
$5.0 million
for a liability related to an SEC investigation of CBOE's compliance with its obligations as a self-regulatory organization under the federal securities laws.
|
•
|
Income tax expense decreased due to the recognition of discrete items resulting in a net benefit of
$12.9 million
.
|
|
2012
|
|
2011
|
|
Inc./(Dec.)
|
|
Percent
Change
|
|||||||
|
(in millions)
|
|
|
|||||||||||
Transaction fees
|
$
|
357.1
|
|
|
$
|
373.1
|
|
|
$
|
(16.0
|
)
|
|
(4.3
|
)%
|
Access fees
|
64.1
|
|
|
68.7
|
|
|
(4.6
|
)
|
|
(6.7
|
)%
|
|||
Exchange services and other fees
|
31.4
|
|
|
18.2
|
|
|
13.2
|
|
|
72.5
|
%
|
|||
Market data fees
|
24.3
|
|
|
19.9
|
|
|
4.4
|
|
|
22.4
|
%
|
|||
Regulatory fees
|
21.0
|
|
|
19.2
|
|
|
1.8
|
|
|
9.1
|
%
|
|||
Other revenue
|
14.4
|
|
|
9.0
|
|
|
5.4
|
|
|
59.0
|
%
|
|||
Total operating revenues
|
$
|
512.3
|
|
|
$
|
508.1
|
|
|
$
|
4.2
|
|
|
0.8
|
%
|
|
2012
|
|
2011
|
|
Inc./(Dec.)
|
|
Percent
Change
|
|||||||
|
(in millions)
|
|
|
|||||||||||
Equities
|
$
|
59.6
|
|
|
$
|
84.3
|
|
|
$
|
(24.7
|
)
|
|
(29.3
|
)%
|
Indexes
|
204.4
|
|
|
197.3
|
|
|
7.1
|
|
|
3.6
|
%
|
|||
Exchange-traded products
|
55.6
|
|
|
74.4
|
|
|
(18.8
|
)
|
|
(25.3
|
)%
|
|||
Total options transaction fees
|
319.6
|
|
|
356.0
|
|
|
(36.4
|
)
|
|
(10.2
|
)%
|
|||
Futures
|
37.5
|
|
|
17.1
|
|
|
20.4
|
|
|
119.3
|
%
|
|||
Total transaction fees
|
$
|
357.1
|
|
|
$
|
373.1
|
|
|
$
|
(16.0
|
)
|
|
(4.3
|
)%
|
|
|
2012
|
|
2011
|
|
||
Equities
|
|
43.6
|
%
|
|
42.4
|
%
|
|
Indexes
|
|
26.8
|
%
|
|
26.3
|
%
|
|
Exchange-traded products
|
|
27.5
|
%
|
|
30.3
|
%
|
|
Futures
|
|
2.1
|
%
|
|
1.0
|
%
|
|
Total
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
2012
|
|
2011
|
|
Percent
Change
|
|||||
Equities
|
$
|
0.121
|
|
|
$
|
0.163
|
|
|
(25.8
|
)%
|
Indexes
|
0.672
|
|
|
0.616
|
|
|
9.1
|
%
|
||
Exchange-traded products
|
0.178
|
|
|
0.202
|
|
|
(11.9
|
)%
|
||
Total options revenue per contract
|
0.288
|
|
|
0.295
|
|
|
(2.4
|
)%
|
||
Futures
|
1.570
|
|
|
1.419
|
|
|
10.6
|
%
|
||
Total average revenue per contract
|
$
|
0.315
|
|
|
$
|
0.307
|
|
|
2.6
|
%
|
•
|
Rate structure
—
Our rate structure includes sliding scales, volume discounts and limits on fees as part of our effort to increase liquidity and market share in multiply-listed options products and, to a lesser extent, on our proprietary products. The transaction fee changes implemented January 3, 2012, including the VIP, which does not include proprietary products, decreased the rate per contract on multiply-listed options products (equities and exchange-traded products) and increased the rate per contract on indexes and futures.
|
•
|
VIX options and futures—
For the year ended
December 31, 2012
as compared to the prior year period, we experienced increases in total volume in VIX options and futures of
13.0%
and 99.2%, respectively. Index options represent the Company's highest options average revenue per contract. Futures contracts generate our highest total average revenue per contract.
|
•
|
Product mix—
The increase in the average revenue per contract reflects a shift in the volume mix by product. Index options and futures contracts accounted for
26.8%
and
2.1%
of total contracts traded in
2012
up from
26.3%
and
1.0%
in
2011
, respectively.
|
|
2012
|
|
2011
|
|
Inc./(Dec.)
|
|
Percent
Change
|
|||||||
|
(in millions)
|
|
|
|||||||||||
Employee costs
|
$
|
104.2
|
|
|
$
|
104.5
|
|
|
$
|
(0.3
|
)
|
|
(0.3
|
)%
|
Depreciation and amortization
|
31.5
|
|
|
34.1
|
|
|
(2.6
|
)
|
|
(7.6
|
)%
|
|||
Data processing
|
19.6
|
|
|
17.9
|
|
|
1.7
|
|
|
9.5
|
%
|
|||
Outside services
|
36.3
|
|
|
27.3
|
|
|
9.0
|
|
|
33.0
|
%
|
|||
Royalty fees
|
46.1
|
|
|
47.8
|
|
|
(1.7
|
)
|
|
(3.6
|
)%
|
|||
Trading volume incentives
|
6.3
|
|
|
14.2
|
|
|
(7.9
|
)
|
|
(55.6
|
)%
|
|||
Travel and promotional expenses
|
10.0
|
|
|
9.8
|
|
|
0.2
|
|
|
2.0
|
%
|
|||
Facilities costs
|
5.0
|
|
|
5.4
|
|
|
(0.4
|
)
|
|
(7.4
|
)%
|
|||
Other expenses
|
9.2
|
|
|
5.5
|
|
|
3.7
|
|
|
67.3
|
%
|
|||
Total operating expenses
|
$
|
268.2
|
|
|
$
|
266.5
|
|
|
$
|
1.7
|
|
|
0.6
|
%
|
|
Total(1)
|
|
Less than
1 year
|
|
1 - 3 years
|
|
3 - 5 years
|
|
More than 5 years
|
||||||||||
Operating leases
|
$
|
12,965
|
|
|
$
|
2,562
|
|
|
$
|
4,646
|
|
|
$
|
1,667
|
|
|
$
|
4,090
|
|
Total
|
$
|
12,965
|
|
|
$
|
2,562
|
|
|
$
|
4,646
|
|
|
$
|
1,667
|
|
|
$
|
4,090
|
|
(1)
|
Gross unrecognized income tax liabilities, excluding interest and penalties, of
$26.7 million
are not included in the table due to uncertainty about the date of their settlement.
|
|
Page
|
CBOE Holdings, Inc. and Subsidiaries:
|
|
(in thousands, except share amounts)
|
December 31, 2013
|
|
December 31, 2012
|
||||
Assets
|
|
|
|
||||
Current Assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
221,341
|
|
|
$
|
135,597
|
|
Accounts receivable—net allowances of 2013 - $266 and 2012 - $340
|
49,888
|
|
|
45,666
|
|
||
Marketing fee receivable
|
8,869
|
|
|
5,216
|
|
||
Income taxes receivable
|
22,039
|
|
|
11,717
|
|
||
Other prepaid expenses
|
4,007
|
|
|
4,146
|
|
||
Other current assets
|
2,717
|
|
|
567
|
|
||
Total Current Assets
|
308,861
|
|
|
202,909
|
|
||
Investments in Affiliates
|
14,581
|
|
|
14,270
|
|
||
Land
|
4,914
|
|
|
4,914
|
|
||
Property and Equipment:
|
|
|
|
||||
Construction in progress
|
23
|
|
|
89
|
|
||
Building
|
65,448
|
|
|
62,442
|
|
||
Furniture and equipment
|
271,437
|
|
|
263,155
|
|
||
Less accumulated depreciation and amortization
|
(269,614
|
)
|
|
(251,642
|
)
|
||
Total Property and Equipment—Net
|
67,294
|
|
|
74,044
|
|
||
Other Assets:
|
|
|
|
||||
Software development work in progress
|
7,853
|
|
|
4,370
|
|
||
Data processing software and other assets (less accumulated amortization—2013, $147,322; 2012, $133,862)
|
38,086
|
|
|
38,351
|
|
||
Total Other Assets—Net
|
45,939
|
|
|
42,721
|
|
||
Total
|
$
|
441,589
|
|
|
$
|
338,858
|
|
Liabilities and Stockholders' Equity
|
|
|
|
||||
Current Liabilities:
|
|
|
|
||||
Accounts payable and accrued expenses
|
$
|
52,958
|
|
|
$
|
45,148
|
|
Dividend payable
|
43,831
|
|
|
—
|
|
||
Marketing fee payable
|
9,442
|
|
|
5,808
|
|
||
Deferred revenue and other liabilities
|
1,100
|
|
|
1,084
|
|
||
Post-retirement medical benefits
|
127
|
|
|
110
|
|
||
Total Current Liabilities
|
107,458
|
|
|
52,150
|
|
||
Long-term Liabilities:
|
|
|
|
||||
Post-retirement medical benefits
|
2,110
|
|
|
1,794
|
|
||
Income tax liability
|
29,903
|
|
|
20,857
|
|
||
Other long-term liabilities
|
3,856
|
|
|
3,946
|
|
||
Deferred income taxes
|
13,745
|
|
|
20,989
|
|
||
Total Long-term Liabilities
|
49,614
|
|
|
47,586
|
|
||
Commitments and Contingencies
|
|
|
|
||||
Total Liabilities
|
157,072
|
|
|
99,736
|
|
||
Stockholders' Equity:
|
|
|
|
||||
Preferred stock, $0.01 par value: 20,000,000 shares authorized, no shares issued and outstanding at December 31, 2013 or 2012
|
—
|
|
|
—
|
|
||
Unrestricted common stock, $0.01 par value: 325,000,000 shares authorized; 91,845,492 issued and 86,770,737 outstanding at December 31, 2013; 91,270,274 issued and 87,271,683 outstanding at December 31, 2012
|
919
|
|
|
913
|
|
||
Additional paid-in-capital
|
90,985
|
|
|
67,812
|
|
||
Retained earnings
|
349,290
|
|
|
275,491
|
|
||
Treasury stock at cost – 5,074,755 shares at December 31, 2013 and 3,998,591 shares at December 31, 2012
|
(155,627
|
)
|
|
(104,201
|
)
|
||
Accumulated other comprehensive loss
|
(1,050
|
)
|
|
(893
|
)
|
||
Total Stockholders' Equity
|
284,517
|
|
|
239,122
|
|
||
Total
|
$
|
441,589
|
|
|
$
|
338,858
|
|
|
Year Ended
|
|
Year Ended
|
|
Year Ended
|
||||||
(in thousands, except per share amounts)
|
December 31, 2013
|
|
December 31, 2012
|
|
December 31, 2011
|
||||||
Operating Revenues:
|
|
|
|
|
|
||||||
Transaction fees
|
$
|
397,218
|
|
|
$
|
357,146
|
|
|
$
|
373,065
|
|
Access fees
|
61,022
|
|
|
64,070
|
|
|
68,693
|
|
|||
Exchange services and other fees
|
37,250
|
|
|
31,368
|
|
|
18,181
|
|
|||
Market data fees
|
24,911
|
|
|
24,360
|
|
|
19,906
|
|
|||
Regulatory fees
|
36,631
|
|
|
20,995
|
|
|
19,243
|
|
|||
Other revenue
|
15,018
|
|
|
14,399
|
|
|
9,056
|
|
|||
Total Operating Revenues
|
572,050
|
|
|
512,338
|
|
|
508,144
|
|
|||
Operating Expenses:
|
|
|
|
|
|
||||||
Employee costs
|
118,083
|
|
|
104,196
|
|
|
104,454
|
|
|||
Depreciation and amortization
|
34,488
|
|
|
31,485
|
|
|
34,094
|
|
|||
Data processing
|
17,898
|
|
|
19,603
|
|
|
17,933
|
|
|||
Outside services
|
34,473
|
|
|
36,300
|
|
|
27,310
|
|
|||
Royalty fees
|
56,576
|
|
|
46,135
|
|
|
47,822
|
|
|||
Trading volume incentives
|
4,355
|
|
|
6,275
|
|
|
14,239
|
|
|||
Travel and promotional expenses
|
9,806
|
|
|
10,006
|
|
|
9,812
|
|
|||
Facilities costs
|
5,053
|
|
|
5,066
|
|
|
5,400
|
|
|||
Other expenses
|
5,504
|
|
|
9,175
|
|
|
5,448
|
|
|||
Total Operating Expenses
|
286,236
|
|
|
268,241
|
|
|
266,512
|
|
|||
Operating Income
|
285,814
|
|
|
244,097
|
|
|
241,632
|
|
|||
Other Income/(Expense):
|
|
|
|
|
|
||||||
Investment income
|
63
|
|
|
149
|
|
|
142
|
|
|||
Net loss from investment in affiliates
|
(2,221
|
)
|
|
(1,695
|
)
|
|
(811
|
)
|
|||
Interest and other borrowing costs
|
—
|
|
|
—
|
|
|
(879
|
)
|
|||
Total Other Expense
|
(2,158
|
)
|
|
(1,546
|
)
|
|
(1,548
|
)
|
|||
Income Before Income Taxes
|
283,656
|
|
|
242,551
|
|
|
240,084
|
|
|||
Income tax provision
|
107,657
|
|
|
85,156
|
|
|
100,678
|
|
|||
Net Income
|
175,999
|
|
|
157,395
|
|
|
139,406
|
|
|||
Net Income allocated to participating securities
|
(2,136
|
)
|
|
(2,141
|
)
|
|
(2,824
|
)
|
|||
Net Income allocated to common stockholders
|
$
|
173,863
|
|
|
$
|
155,254
|
|
|
$
|
136,582
|
|
Net income per share allocated to common stockholders (Note 14)
|
|
|
|
|
|
||||||
Basic
|
$
|
1.99
|
|
|
$
|
1.78
|
|
|
$
|
1.52
|
|
Diluted
|
1.99
|
|
|
1.78
|
|
|
1.52
|
|
|||
Weighted average shares used in computing net income per share
|
|
|
|
|
|
||||||
Basic
|
87,331
|
|
|
87,460
|
|
|
89,994
|
|
|||
Diluted
|
87,331
|
|
|
87,460
|
|
|
89,994
|
|
|
Year Ended
|
|
Year Ended
|
|
Year Ended
|
||||||
(in thousands)
|
December 31, 2013
|
|
December 31, 2012
|
|
December 31, 2011
|
||||||
|
|
|
|
|
|
||||||
Net Income
|
$
|
175,999
|
|
|
$
|
157,395
|
|
|
$
|
139,406
|
|
|
|
|
|
|
|
||||||
Comprehensive Income (Loss) - net of tax:
|
|
|
|
|
|
||||||
Post retirement benefit obligation
|
(157
|
)
|
|
6
|
|
|
73
|
|
|||
|
|
|
|
|
|
||||||
Comprehensive Income
|
175,842
|
|
|
157,401
|
|
|
139,479
|
|
|||
Comprehensive Income allocated to participating securities
|
(2,136
|
)
|
|
(2,141
|
)
|
|
(2,824
|
)
|
|||
Comprehensive Income allocated to common stockholders
|
$
|
173,706
|
|
|
$
|
155,260
|
|
|
$
|
136,655
|
|
|
Year Ended
|
|
Year Ended
|
|
Year Ended
|
||||||
(in thousands)
|
December 31, 2013
|
|
December 31, 2012
|
|
December 31, 2011
|
||||||
Cash Flows from Operating Activities:
|
|
|
|
|
|
||||||
Net Income
|
$
|
175,999
|
|
|
$
|
157,395
|
|
|
$
|
139,406
|
|
Adjustments to reconcile net income to net cash flows provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
34,488
|
|
|
31,485
|
|
|
34,094
|
|
|||
Other amortization
|
114
|
|
|
88
|
|
|
90
|
|
|||
Provision for deferred income taxes
|
(7,145
|
)
|
|
(495
|
)
|
|
940
|
|
|||
Stock-based compensation
|
20,823
|
|
|
12,348
|
|
|
12,618
|
|
|||
Equity in loss of affiliates
|
1,976
|
|
|
1,695
|
|
|
352
|
|
|||
Impairment of investment in affiliates and other assets
|
245
|
|
|
—
|
|
|
459
|
|
|||
Loss on disposition of property
|
3
|
|
|
1
|
|
|
1,225
|
|
|||
Changes in assets and liabilities:
|
|
|
|
|
|
||||||
Accounts receivable
|
(4,222
|
)
|
|
(8,088
|
)
|
|
168
|
|
|||
Marketing fee receivable
|
(3,653
|
)
|
|
(21
|
)
|
|
2,620
|
|
|||
Income taxes receivable
|
(10,321
|
)
|
|
(4,961
|
)
|
|
(1,219
|
)
|
|||
Prepaid expenses
|
139
|
|
|
6
|
|
|
704
|
|
|||
Other current assets
|
(2,151
|
)
|
|
498
|
|
|
(528
|
)
|
|||
Accounts payable and accrued expenses
|
5,516
|
|
|
1,113
|
|
|
5,784
|
|
|||
Marketing fee payable
|
3,634
|
|
|
43
|
|
|
(2,584
|
)
|
|||
Deferred revenue and other liabilities
|
(75
|
)
|
|
773
|
|
|
(16
|
)
|
|||
Post-retirement benefit obligations
|
(36
|
)
|
|
(17
|
)
|
|
(4
|
)
|
|||
Income tax liability
|
9,046
|
|
|
8,672
|
|
|
9,020
|
|
|||
Net Cash Flows provided by Operating Activities
|
224,380
|
|
|
200,535
|
|
|
203,129
|
|
|||
Cash Flows from Investing Activities:
|
|
|
|
|
|
||||||
Capital and other assets expenditures
|
(28,673
|
)
|
|
(30,066
|
)
|
|
(29,143
|
)
|
|||
Investment in Signal Trading Systems, LLC
|
(1,920
|
)
|
|
(1,661
|
)
|
|
—
|
|
|||
Investment in IPXI Holdings, LLC
|
(612
|
)
|
|
(1,250
|
)
|
|
(1,250
|
)
|
|||
Other
|
8
|
|
|
—
|
|
|
112
|
|
|||
Net Cash Flows used in Investing Activities
|
(31,197
|
)
|
|
(32,977
|
)
|
|
(30,281
|
)
|
|||
Cash Flows from Financing Activities:
|
|
|
|
|
|
||||||
Payment of quarterly dividends
|
(58,369
|
)
|
|
(47,828
|
)
|
|
(40,372
|
)
|
|||
Payment of special dividend
|
—
|
|
|
(66,197
|
)
|
|
—
|
|
|||
Excess tax benefit from stock-based compensation
|
2,356
|
|
|
—
|
|
|
—
|
|
|||
Purchase of unrestricted stock from employees
|
(6,136
|
)
|
|
(3,128
|
)
|
|
(4,339
|
)
|
|||
Purchase of unrestricted common stock under announced program
|
(45,290
|
)
|
|
(49,744
|
)
|
|
(46,990
|
)
|
|||
Net Cash Flows used in Financing Activities
|
(107,439
|
)
|
|
(166,897
|
)
|
|
(91,701
|
)
|
|||
Net Increase in Cash and Cash Equivalents
|
85,744
|
|
|
661
|
|
|
81,147
|
|
|||
Cash and Cash Equivalents at Beginning of Period
|
135,597
|
|
|
134,936
|
|
|
53,789
|
|
|||
Cash and Cash Equivalents at End of Period
|
$
|
221,341
|
|
|
$
|
135,597
|
|
|
$
|
134,936
|
|
Supplemental Disclosure of Cash Flow Information
|
|
|
|
|
|
||||||
Cash paid for income taxes
|
$
|
113,741
|
|
|
$
|
82,633
|
|
|
$
|
93,224
|
|
Non-cash activities:
|
|
|
|
|
|
||||||
Change in post-retirement benefit obligation
|
255
|
|
|
(25
|
)
|
|
(90
|
)
|
|||
Unpaid liability - dividends payable
|
43,831
|
|
|
—
|
|
|
—
|
|
|||
Unpaid liability to acquire equipment and software
|
3,048
|
|
|
755
|
|
|
1,537
|
|
|||
Unpaid liability for investment in IPXI Holdings, LLC
|
—
|
|
|
—
|
|
|
1,250
|
|
(in thousands)
|
Preferred
Stock
|
|
Unrestricted
Common
Stock
|
|
Class
A-2 Common
Stock
|
|
Additional
Paid-In
Capital
|
|
Retained
Earnings
|
|
Treasury Stock
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Total
Stockholders'
Equity
|
||||||||||||||||
Balance—January 1, 2011
|
—
|
|
|
518
|
|
|
383
|
|
|
42,858
|
|
|
133,087
|
|
|
—
|
|
|
(972
|
)
|
|
175,874
|
|
||||||||
Automatic conversion of the shares of Class A-2 into unrestricted common stock
|
|
|
|
383
|
|
|
(383
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|||||||||
Cash dividends on common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
(40,372
|
)
|
|
|
|
|
|
|
(40,372
|
)
|
|||||||||
Stock-based compensation
|
|
|
|
|
|
|
|
|
12,618
|
|
|
|
|
|
|
|
|
|
|
12,618
|
|
||||||||||
Issuance of vested restricted stock granted to employees
|
|
|
|
7
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
—
|
|
||||||||||
Purchase of unrestricted common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(51,329
|
)
|
|
|
|
|
(51,329
|
)
|
||||||||||
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
139,406
|
|
|
|
|
|
|
|
139,406
|
|
|||||||||
Post-retirement benefit obligation adjustment—net of tax expense of $17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73
|
|
|
73
|
|
|||||||||
Balance—December 31, 2011
|
—
|
|
|
908
|
|
|
—
|
|
|
55,469
|
|
|
232,121
|
|
|
(51,329
|
)
|
|
(899
|
)
|
|
236,270
|
|
||||||||
Cash dividends on common stock
|
|
|
|
|
|
|
|
|
(114,025
|
)
|
|
|
|
|
|
(114,025
|
)
|
||||||||||||||
Stock-based compensation
|
|
|
|
|
|
|
12,348
|
|
|
|
|
|
|
|
|
12,348
|
|
||||||||||||||
Issuance of vested restricted stock granted to employees
|
|
|
5
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
—
|
|
|||||||||||||
Purchase of unrestricted common stock
|
|
|
|
|
|
|
|
|
|
|
(52,872
|
)
|
|
|
|
(52,872
|
)
|
||||||||||||||
Net income
|
|
|
|
|
|
|
|
|
157,395
|
|
|
|
|
|
|
157,395
|
|
||||||||||||||
Post-retirement benefit obligation adjustment—net of tax expense of $19
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
6
|
|
||||||||||||||
Balance-December 31, 2012
|
—
|
|
|
913
|
|
|
—
|
|
|
67,812
|
|
|
275,491
|
|
|
(104,201
|
)
|
|
(893
|
)
|
|
239,122
|
|
||||||||
Cash dividends on common stock
|
|
|
|
|
|
|
|
|
(102,200
|
)
|
|
|
|
|
|
(102,200
|
)
|
||||||||||||||
Stock-based compensation
|
|
|
|
|
|
|
20,823
|
|
|
|
|
|
|
|
|
20,823
|
|
||||||||||||||
Issuance of vested restricted stock granted to employees
|
|
|
6
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
—
|
|
|||||||||||||
Excess tax benefits from stock-based compensation plan
|
|
|
|
|
|
|
2,356
|
|
|
|
|
|
|
|
|
2,356
|
|
||||||||||||||
Purchase of unrestricted common stock
|
|
|
|
|
|
|
|
|
|
|
$
|
(51,426
|
)
|
|
|
|
(51,426
|
)
|
|||||||||||||
Net income
|
|
|
|
|
|
|
|
|
175,999
|
|
|
|
|
|
|
175,999
|
|
||||||||||||||
Post-retirement benefit obligation adjustment—net of tax benefit of $99
|
|
|
|
|
|
|
|
|
|
|
|
|
(157
|
)
|
|
(157
|
)
|
||||||||||||||
Balance-December 31, 2013
|
$
|
—
|
|
|
$
|
919
|
|
|
$
|
—
|
|
|
$
|
90,985
|
|
|
$
|
349,290
|
|
|
$
|
(155,627
|
)
|
|
$
|
(1,050
|
)
|
|
$
|
284,517
|
|
|
2013
|
|
2012
|
||||
Investment in OCC
|
$
|
333
|
|
|
$
|
333
|
|
Investment in Signal Trading
|
11,130
|
|
|
11,437
|
|
||
Investment in IPXI
|
3,118
|
|
|
2,500
|
|
||
Investment in CBSX
|
—
|
|
|
—
|
|
||
Investment in Affiliates
|
$
|
14,581
|
|
|
$
|
14,270
|
|
|
2013
|
|
2012
|
||||
Compensation and benefit related liabilities
|
$
|
22,193
|
|
|
$
|
18,306
|
|
Royalties
|
13,512
|
|
|
10,529
|
|
||
Accounts payable
|
4,219
|
|
|
735
|
|
||
Facilities
|
1,824
|
|
|
1,932
|
|
||
Legal
|
1,602
|
|
|
1,706
|
|
||
Linkage
|
1,157
|
|
|
1,116
|
|
||
Liability related to SEC matter
|
—
|
|
|
5,000
|
|
||
Other
|
8,451
|
|
|
5,824
|
|
||
Total
|
$
|
52,958
|
|
|
$
|
45,148
|
|
(in thousands)
|
Balance at
December 31, 2012 |
|
Cash
Additions
|
|
Revenue
Recognition
|
|
Balance at
December 31,
2013
|
||||||||
Liquidity provider sliding scale
|
$
|
—
|
|
|
$
|
29,232
|
|
|
$
|
(29,232
|
)
|
|
$
|
—
|
|
Other, net
|
1,084
|
|
|
7,348
|
|
|
(7,332
|
)
|
|
1,100
|
|
||||
Total deferred revenue
|
$
|
1,084
|
|
|
$
|
36,580
|
|
|
$
|
(36,564
|
)
|
|
$
|
1,100
|
|
(in thousands)
|
Balance at
December 31,
2011
|
|
Cash
Additions
|
|
Revenue
Recognition
|
|
Balance at
December 31,
2012
|
||||||||
Liquidity provider sliding scale
|
—
|
|
|
$
|
29,759
|
|
|
$
|
(29,759
|
)
|
|
$
|
—
|
|
|
Other, net
|
351
|
|
|
4,940
|
|
|
(4,207
|
)
|
|
1,084
|
|
||||
Total deferred revenue
|
$
|
351
|
|
|
$
|
34,699
|
|
|
$
|
(33,966
|
)
|
|
$
|
1,084
|
|
|
2013
|
|
2012
|
|
2011
|
|||
Statutory federal income tax rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
State income tax rate, net of federal income tax effect
|
3.6
|
|
|
4.8
|
|
|
5.5
|
|
Section 199 deductions
|
(2.1
|
)
|
|
(7.5
|
)
|
|
—
|
|
Other, net
|
1.5
|
|
|
2.8
|
|
|
1.4
|
|
Effective income tax rate
|
38.0
|
%
|
|
35.1
|
%
|
|
41.9
|
%
|
|
2013
|
|
2012
|
|
2011
|
||||||
Current:
|
|
|
|
|
|
||||||
Federal
|
$
|
93,844
|
|
|
$
|
65,054
|
|
|
$
|
76,637
|
|
State
|
20,958
|
|
|
20,597
|
|
|
23,101
|
|
|||
Total current
|
114,802
|
|
|
85,651
|
|
|
99,738
|
|
|||
Deferred:
|
|
|
|
|
|
||||||
Federal
|
(4,636
|
)
|
|
406
|
|
|
(48
|
)
|
|||
State
|
(2,509
|
)
|
|
(901
|
)
|
|
988
|
|
|||
Total deferred
|
(7,145
|
)
|
|
(495
|
)
|
|
940
|
|
|||
Total
|
$
|
107,657
|
|
|
$
|
85,156
|
|
|
$
|
100,678
|
|
|
2013
|
|
2012
|
||||
Deferred tax assets
|
$
|
25,144
|
|
|
$
|
22,935
|
|
Deferred tax liabilities
|
(38,889
|
)
|
|
(43,924
|
)
|
||
Net deferred income tax liability
|
$
|
(13,745
|
)
|
|
$
|
(20,989
|
)
|
|
2013
|
|
2012
|
||||
Deferred tax assets:
|
|
|
|
||||
Intangibles
|
$
|
50
|
|
|
$
|
89
|
|
Accrued compensation and benefits
|
11,233
|
|
|
9,221
|
|
||
Property, equipment and technology, net
|
697
|
|
|
570
|
|
||
Investment in affiliates
|
6,158
|
|
|
7,933
|
|
||
Other
|
7,006
|
|
|
5,122
|
|
||
Total deferred tax assets
|
25,144
|
|
|
22,935
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Property, equipment and technology, net
|
(36,180
|
)
|
|
(36,930
|
)
|
||
Investment in affiliates
|
(1,683
|
)
|
|
(1,687
|
)
|
||
Prepaid
|
(1,027
|
)
|
|
(996
|
)
|
||
Other
|
1
|
|
|
(4,311
|
)
|
||
Total deferred tax liabilities
|
(38,889
|
)
|
|
(43,924
|
)
|
||
Net deferred tax liabilities
|
$
|
(13,745
|
)
|
|
$
|
(20,989
|
)
|
|
2013
|
|
2012
|
|
2011
|
||||||
Balance as of January 1
|
$
|
19,493
|
|
|
$
|
12,185
|
|
|
$
|
3,165
|
|
Gross increases on tax positions in prior period
|
549
|
|
|
3,401
|
|
|
9,186
|
|
|||
Gross decreases on tax positions in prior period
|
(18
|
)
|
|
(833
|
)
|
|
(2,215
|
)
|
|||
Gross increases on tax positions in current period
|
7,270
|
|
|
4,740
|
|
|
2,768
|
|
|||
Lapse of statue of limitations
|
(549
|
)
|
|
—
|
|
|
(719
|
)
|
|||
Balance as of December 31
|
$
|
26,745
|
|
|
$
|
19,493
|
|
|
$
|
12,185
|
|
•
|
Level 1—Unadjusted inputs based on quoted markets for identical assets or liabilities.
|
•
|
Level 2—Observable inputs, either direct or indirect, not including Level 1, corroborated by market data or based upon quoted prices in non-active markets.
|
•
|
Level 3—Unobservable inputs that reflect management’s best assumptions of what market participants would use in valuing the asset or liability.
|
(amounts in thousands)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets at fair value:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
207,000
|
|
|
—
|
|
|
—
|
|
|
$
|
207,000
|
|
||
Total assets at fair value at December 31, 2013
|
$
|
207,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
207,000
|
|
(amounts in thousands)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets at fair value:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
126,000
|
|
|
—
|
|
|
—
|
|
|
126,000
|
|
||||
Total assets at fair value at December 31, 2012
|
$
|
126,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
126,000
|
|
Year
|
Operating
Leases
|
|
Total
|
||||
2014
|
$
|
2,562
|
|
|
$
|
2,562
|
|
2015
|
2,348
|
|
|
2,348
|
|
||
2016
|
2,298
|
|
|
2,298
|
|
||
2017
|
1,117
|
|
|
1,117
|
|
||
2018
|
550
|
|
|
550
|
|
||
Total
|
$
|
8,875
|
|
|
$
|
8,875
|
|
|
Number of Shares
of Restricted
Stock
|
|
Weighted Average
Grant-Date Fair
Value
|
|||
Unvested restricted stock at January 1, 2013
|
835,823
|
|
|
$
|
28.92
|
|
Granted
|
474,152
|
|
|
35.35
|
|
|
Vested
|
(590,422
|
)
|
|
41.31
|
|
|
Forfeited
|
(11,332
|
)
|
|
29.25
|
|
|
Unvested restricted stock at December 31, 2013
|
708,221
|
|
|
$
|
33.41
|
|
(in thousands, except per share amounts)
|
2013
|
|
2012
|
|
2011
|
||||||
Basic EPS Numerator:
|
|
|
|
|
|
||||||
Net Income
|
$
|
175,999
|
|
|
$
|
157,395
|
|
|
$
|
139,406
|
|
Less: Earnings allocated to participating securities
|
(2,136
|
)
|
|
(2,141
|
)
|
|
(2,824
|
)
|
|||
Net Income allocated to common stockholders
|
$
|
173,863
|
|
|
$
|
155,254
|
|
|
$
|
136,582
|
|
Basic EPS Denominator:
|
|
|
|
|
|
||||||
Weighted average shares outstanding
|
87,331
|
|
|
87,460
|
|
|
89,994
|
|
|||
Basic net income per common share
|
$
|
1.99
|
|
|
$
|
1.78
|
|
|
$
|
1.52
|
|
Diluted EPS Numerator:
|
|
|
|
|
|
||||||
Net Income
|
$
|
175,999
|
|
|
$
|
157,395
|
|
|
$
|
139,406
|
|
Less: Earnings allocated to participating securities
|
(2,136
|
)
|
|
(2,141
|
)
|
|
(2,824
|
)
|
|||
Net Income allocated to common stockholders
|
$
|
173,863
|
|
|
$
|
155,254
|
|
|
$
|
136,582
|
|
Diluted EPS Denominator:
|
|
|
|
|
|
||||||
Weighted average shares outstanding
|
87,331
|
|
|
87,460
|
|
|
89,994
|
|
|||
Dilutive common shares issued under restricted stock program
|
—
|
|
|
—
|
|
|
—
|
|
|||
Diluted net income per common share
|
$
|
1.99
|
|
|
$
|
1.78
|
|
|
$
|
1.52
|
|
Year ended December 31, 2013 (in thousands)
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Year
|
||||||||||
Operating revenues
|
$
|
142,705
|
|
|
$
|
150,772
|
|
|
$
|
136,743
|
|
|
$
|
141,830
|
|
|
$
|
572,050
|
|
Operating expenses
|
73,275
|
|
|
75,414
|
|
|
68,316
|
|
|
69,231
|
|
|
286,236
|
|
|||||
Operating income
|
69,430
|
|
|
75,358
|
|
|
68,427
|
|
|
72,599
|
|
|
285,814
|
|
|||||
Net income
|
$
|
42,373
|
|
|
$
|
46,161
|
|
|
$
|
41,356
|
|
|
$
|
46,110
|
|
|
$
|
175,999
|
|
Net income allocated to common stockholders
|
$
|
41,789
|
|
|
$
|
45,477
|
|
|
$
|
40,955
|
|
|
$
|
45,643
|
|
|
$
|
173,863
|
|
Diluted—net income per share to common stockholders
|
$
|
0.48
|
|
|
$
|
0.52
|
|
|
$
|
0.47
|
|
|
$
|
0.52
|
|
|
$
|
1.99
|
|
Year ended December 31, 2012 (in thousands)
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Year
|
||||||||||
Operating revenues
|
$
|
121,392
|
|
|
$
|
132,549
|
|
|
$
|
128,319
|
|
|
$
|
130,078
|
|
|
$
|
512,338
|
|
Operating expenses
|
63,977
|
|
|
66,480
|
|
|
67,458
|
|
|
70,326
|
|
|
268,241
|
|
|||||
Operating income
|
57,415
|
|
|
66,069
|
|
|
60,861
|
|
|
59,752
|
|
|
244,097
|
|
|||||
Net income
|
$
|
33,417
|
|
|
$
|
38,496
|
|
|
$
|
45,758
|
|
|
$
|
39,724
|
|
|
$
|
157,395
|
|
Net income allocated to common stockholders
|
$
|
32,863
|
|
|
$
|
37,903
|
|
|
$
|
45,243
|
|
|
$
|
39,245
|
|
|
$
|
155,254
|
|
Diluted—net income per share to common stockholders
|
$
|
0.37
|
|
|
$
|
0.44
|
|
|
$
|
0.52
|
|
|
$
|
0.45
|
|
|
$
|
1.78
|
|
•
|
In the first quarter of 2013, the Company recorded accelerated stock-based compensation expense of
$3.2 million
for certain executives due to provisions contained in their employment arrangements.
|
•
|
In the second quarter of 2013, the Company recorded
$1.0 million
of expense for an estimated liability related to an SEC investigation of CBOE's compliance with its obligations as a self-regulatory organization under the federal securities laws.
|
•
|
In the second quarter of 2013, the Company recorded grants to the Chief Executive Officer and President and Chief Operating Officer totaling
$2.5 million
, of which
50%
vested upon grant. In addition, the Company recorded accelerated stock-based compensation of
$0.8 million
to recognize the remaining value of stock grants awarded to employees in its regulatory division who will no longer receive stock-based compensation.
|
•
|
In the third quarter of 2012, the Company filed an amended return for 2008 and completed its return for 2011 and recognized, as a discrete item, a
$7.6 million
benefit for a Section 199 deduction for U.S. production activities which encompasses all personal property including computer software for those years.
|
•
|
In the fourth quarter of 2012, the Company recorded
$5.0 million
of expense for an estimated liability related to an SEC investigation of CBOE's compliance with its obligations as a self-regulatory organization under the federal securities laws.
|
•
|
In the fourth quarter of 2012, the Company filed amended returns for 2009 and 2010 and recognized, as a discrete item, a
$5.3 million
benefit for a Section 199 deduction for U.S. production activities which encompasses all personal property including computer software for those years.
|
•
|
Time-based Restricted Units.
50% of the restricted stock units have a three-year vesting period, with one-third of the restricted stock units vesting on each of the first, second and third anniversaries of the grant date. These awards are not subject to additional performance conditions.
|
•
|
Total Shareholder Return ("TSR") Performance Units.
25% of the restricted stock units will have a performance condition under which the number of units that will ultimately be awarded will vary from 0% to 200% of the original grant, based on the Company’s total shareholder return (calculated as the increase in the Company’s stock price over the performance period plus reinvested dividends, divided by the stock price at the beginning of the performance period) relative to the total shareholder returns for the S&P 500 index during the performance period.
|
•
|
Earnings Per Share ("EPS") Performance Units.
25% of the restricted stock units will have a performance condition under which the number of units that will ultimately be awarded will vary from 0% to 200% of the original grant, based on the Company’s earnings per share during the performance period, as adjusted for certain extraordinary, unusual or non-recurring items.
|
Named Executive Officer
|
Time-based Restricted Units
|
TSR Performance Units
|
EPS Performance Units
|
|
|||
Edward T. Tilly
|
16,121
|
|
8,061
|
|
8,061
|
|
|
Edward L. Provost
|
9,970
|
|
4,985
|
|
4,985
|
|
|
Alan J. Dean
|
7,010
|
|
3,505
|
|
3,505
|
|
|
Gerald T. O'Connell
|
6,143
|
|
3,072
|
|
3,072
|
|
|
(a)
|
Documents filed as part of this report
|
•
|
Consolidated Balance Sheets as of
December 31, 2013
and
2012
|
•
|
Consolidated Statements of Income for the years ended
December 31, 2013
,
2012
and
2011
|
•
|
Consolidated Statements of Comprehensive Income for the years ended
December 31, 2013
,
2012
and
2011
|
•
|
Consolidated Statements of Cash Flows for the years ended
December 31, 2013
,
2012
and
2011
|
•
|
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 2013
,
2012
and
2011
|
•
|
Notes to Consolidated Financial Statements
|
(b)
|
Exhibits
|
Exhibit
No.
|
|
Description of Exhibit
|
|
3.1
|
|
|
Amended and Restated Certificate of Incorporation of CBOE Holdings, Inc., incorporated by reference to Annex C to Amendment No. 7 to the Company's Registration Statement on Form S-4 (File No. 333-140574) filed on April 26, 2010.
|
3.2
|
|
|
Second Amended and Restated Bylaws of CBOE Holdings, Inc., incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K (File No. 333-140574) filed on January 24, 2014.
|
10.1
|
|
|
Restated License Agreement, dated November 1, 1994, by and between Standard & Poor's Financial Services LLC (as successor-in-interest to Standard & Poor's, a division of McGraw-Hill, Inc.) and the Chicago Board Options Exchange, Incorporated (the "S&P License Agreement"), incorporated by reference to Exhibit 10.1 to Amendment No. 6 to the Company's Registration Statement on Form S-4 (File No. 333-140574) filed on April 12, 2010.+
|
10.2
|
|
|
Amendment No. 1 to the S&P License Agreement, dated January 15, 1995, incorporated by reference to Exhibit 10.2 to Amendment No. 6 to the Company's Registration Statement on Form S-4 (File No. 333-140574) filed on April 12, 2010.+
|
10.3
|
|
|
Amendment No. 2 to the S&P License Agreement, dated April 1, 1998, incorporated by reference to Exhibit 10.3 to Amendment No. 6 to the Company's Registration Statement on Form S-4 (File No. 333-140574) filed on April 12, 2010.+
|
10.4
|
|
|
Amendment No. 3 to the S&P License Agreement, dated July 28, 2000, incorporated by reference to Exhibit 10.4 to Amendment No. 6 to the Company's Registration Statement on Form S-4 (File No. 333-140574) filed on April 12, 2010.+
|
10.5
|
|
|
Amendment No. 4 to the S&P License Agreement, dated October 27, 2000, incorporated by reference to Exhibit 10.5 to Amendment No. 6 to the Company's Registration Statement on Form S-4 (File No. 333-140574) filed on April 12, 2010.+
|
Exhibit
No.
|
|
Description of Exhibit
|
|
10.6
|
|
|
Amendment No. 5 to the S&P License Agreement, dated March 1, 2003, incorporated by reference to Exhibit 10.6 to Amendment No. 6 to the Company's Registration Statement on Form S-4 (File No. 333-140574) filed on April 12, 2010.+
|
10.7
|
|
|
Amended and Restated Amendment No. 6 to the S&P License Agreement, dated February 24, 2009, incorporated by reference to Exhibit 10.7 to Amendment No. 6 to the Company's Registration Statement on Form S-4 (File No. 333-140574) filed on April 12, 2010.+
|
10.8
|
|
|
Amended and Restated Amendment No. 7 to the S&P License Agreement, dated February 24, 2009, incorporated by reference to Exhibit 10.8 to Amendment No. 6 to the Company's Registration Statement on Form S-4 (File No. 333-140574) filed on April 12, 2010.+
|
10.9
|
|
|
Amendment No. 8 to the S&P License Agreement, dated January 9, 2005, incorporated by reference to Exhibit 10.9 to Amendment No. 6 to the Company's Registration Statement on Form S-4 (File No. 333-140574) filed on April 12, 2010.+
|
10.10
|
|
|
Amendment No. 10 to the S&P License Agreement, dated June 19, 2009, incorporated by reference to Exhibit 10.10 to Amendment No. 6 to the Registration Statement on Form S-4 (File No. 333-140574) filed on April 12, 2010.+
|
10.11
|
|
|
Amendment No. 11 to the Restated License Agreement, dated as of April 29, 2010, by and between Standard & Poor's Financial Services LLC and the Chicago Board Options Exchange, Incorporated, incorporated by reference to Exhibit 10 to the Company's Current Report on Form 8-K (File No. 001-34774) filed on May 11, 2010.+
|
10.12
|
|
|
Chicago Board Options Exchange, Incorporated Executive Retirement Plan, incorporated by reference to Exhibit 10.13 to Amendment No. 4 to the Company's Registration Statement on Form S-4 (File No. 333-140574) filed on August 14, 2009.*
|
10.13
|
|
|
Chicago Board Options Exchange, Incorporated Supplemental Retirement Plan, incorporated by reference to Exhibit 10.14 to Amendment No. 4 to the Company's Registration Statement on Form S-4 (File No. 333-140574) filed on August 14, 2009.*
|
10.14
|
|
|
Chicago Board Options Exchange, Incorporated Deferred Compensation Plan for Officers, incorporated by reference to Exhibit 10.15 to Amendment No. 4 to the Company's Registration Statement on Form S-4 (File No. 333-140574) filed on August 14, 2009.*
|
10.15
|
|
|
Amendment No. 1 to the Chicago Board Options Exchange, Incorporated Supplemental Retirement Plan, incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2010 (File No. 001-34774) filed on November 12, 2010.*
|
10.16
|
|
|
Amended and Restated Employment Agreement, effective December 31, 2009, by and between the Chicago Board Options Exchange, Incorporated and William J. Brodsky, incorporated by reference to Exhibit 10.16 to Amendment No. 5 to the Company's Registration Statement on Form S-4 (File No. 333-140574) filed on March 11, 2010.*
|
10.17
|
|
|
Amended and Restated CBOE Holdings, Inc. Long-Term Incentive Plan, incorporated by reference to Exhibit 10.20 to Amendment No. 4 to the Company's Registration Statement on Form S-1 (File No. 333-165393) filed on June 11, 2010.*
|
10.18
|
|
|
Form of Restricted Stock Award Agreement (for Executive Officers), incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 (File No. 001-34774) filed on June 11, 2010.*
|
10.19
|
|
|
Form of Restricted Stock Award Agreement (for Non-employee Directors), incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 (File No. 001-34774) filed on June 11, 2010.*
|
10.20
|
|
|
Amended and Restated CBOE Holdings, Inc. Executive Severance Plan, incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K (File No. 001-34774) filed on December 12, 2012.*
|
Exhibit
No.
|
|
Description of Exhibit
|
|
10.21
|
|
|
Form of Director Indemnification Agreement, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K (File No. 001-34774) filed on December 20, 2010.
|
10.22
|
|
|
Amended and Restated CBOE Holdings, Inc. Long-Term Incentive Plan, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-34774), filed on May 18, 2011. *
|
10.23
|
|
|
Amendment No. 1, dated August 22, 2011, to the Amended and Restated License Agreement, dated September 29, 2006, by and between CME Group Index Services LLC (as successor-in-interest to Dow Jones & Company, Inc.) and the Chicago Board Options Exchange, Incorporated, incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 (File No. 001-34774) filed on November 9, 2011.+
|
10.24
|
|
|
Transition Agreement, by and among CBOE Holdings, Inc., Chicago Board Options Exchange, Incorporated and William J. Brodsky, dated December 11, 2012, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K (File No. 001-34774) filed on December 12, 2012.*
|
10.25
|
|
|
Amended and Restated Employment Agreement, by and among CBOE Holdings, Inc., Chicago Board Options Exchange, Incorporated and Edward T. Tilly, dated December 11, 2012, incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K (File No. 001-34774) filed on December 12, 2012.*
|
10.26
|
|
|
Amendment No. 12, to the S&P License Agreement, dated March 9, 2013, incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q (File no. 001-34774) filed on May 7, 2013. +
|
10.27
|
|
|
Form of Restricted Stock Unit Award Agreement (for Executive Officers) under the Amended and Restated CBOE Holdings, Inc. Long-term Incentive Plan.* (filed herewith)
|
10.28
|
|
|
Form of Restricted Stock Unit Award Agreement (relative total shareholder return) under the Amended and Restated CBOE Holdings, Inc. Long-term Incentive Plan.* (filed herewith)
|
10.29
|
|
|
Form of Restricted Stock Unit Award Agreement (earnings per share) under the Amended and Restated CBOE Holdings, Inc. Long-term Incentive Plan.* (filed herewith)
|
21.1
|
|
|
Subsidiaries of CBOE Holdings, Inc. (filed herewith)
|
23.1
|
|
|
Consent of Independent Registered Public Accounting Firm (filed herewith)
|
24.1
|
|
|
Powers of Attorney (incorporated by reference to the signature page of this Annual Report on Form 10-K)
|
31.1
|
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14 (filed herewith).
|
31.2
|
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14 (filed herewith).
|
32.1
|
|
|
Certificate of Chief Executive Officer pursuant to Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (filed herewith).
|
32.2
|
|
|
Certificate of Chief Financial Officer pursuant to Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (filed herewith).
|
101.INS
|
|
|
XBRL Instance Document (filed herewith)
|
|
|
|
|
101.SCH
|
|
|
XBRL Taxonomy Extension Schema Document (filed herewith).
|
|
|
|
|
101.CAL
|
|
|
XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith).
|
|
|
|
|
101.DEF
|
|
|
XBRL Taxonomy Extension Definition Linkbase (filed herewith).
|
|
|
|
|
101.LAB
|
|
|
XBRL Taxonomy Extension Label Linkbase Document (filed herewith).
|
|
|
|
|
101.PRE
|
|
|
XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith).
|
|
|
|
|
|
|
|
CBOE HOLDINGS, INC.
(Registrant)
|
||
By:
|
|
/s/ EDWARD T. TILLY
|
|
|
Edward T. Tilly
Chief Executive Officer
|
SIGNATURE
|
|
TITLE
|
|
DATE
|
|
|
|
|
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/s/ EDWARD T. TILLY
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Chief Executive Officer and Director
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February 21, 2014
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Edward T. Tilly
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(Principal Executive Officer)
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/s/ ALAN J. DEAN
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Executive Vice President, Chief Financial Officer and Treasurer
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February 21, 2014
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Alan J. Dean
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(Principal Financial Officer)
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/s/ DAVID S. REYNOLDS
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Vice President and Chief Accounting Officer
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February 21, 2014
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David S. Reynolds
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(Principal Accounting Officer)
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/s/ WILLIAM J. BRODSKY
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Executive Chairman
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February 21, 2014
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William J. Brodsky
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/s/ JAMES R. BORIS
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Director
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February 21, 2014
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James R. Boris
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/s/ FRANK E. ENGLISH
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Director
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February 21, 2014
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Frank E. English
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/s/ EDWARD FITZPATRICK
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Director
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February 21, 2014
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Edward Fitzpatrick
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SIGNATURE
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TITLE
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DATE
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/s/ JANET P. FROETSCHER
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Director
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February 21, 2014
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Janet P. Froetscher
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/s/ JILL R. GOODMAN
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Director
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February 21, 2014
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Jill R. Goodman
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/s/ DUANE R. KULLBERG
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Director
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February 21, 2014
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Duane R. Kullberg
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/s/ R. EDEN MARTIN
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Director
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February 21, 2014
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R. Eden Martin
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/s/ RODERICK A. PALMORE
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Director
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February 21, 2014
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Roderick A. Palmore
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/s/ SUSAN M. PHILLIPS
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Director
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February 21, 2014
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Susan M. Phillips
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/s/ SAMUEL K. SKINNER
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Director
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February 21, 2014
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Samuel K. Skinner
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/s/ CAROL E. STONE
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Director
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February 21, 2014
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Carole E. Stone
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/s/ EUGENE S. SUNSHINE
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Director
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February 21, 2014
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Eugene S. Sunshine
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1.
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Award
. The Corporation hereby awards to Participant [__________] Restricted Stock Units (the “
Restricted Stock Units
”). The Restricted Stock Units will be subject to the terms and conditions of the Plan and this Agreement. Each Restricted Stock Unit is a notional amount that represents one unvested share of Stock and entitles Participant, subject to the terms of this Agreement, to receive a share of Stock if and when the Restricted Stock Unit vests.
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2.
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No Rights as Stockholder; Dividend Equivalents
. Participant shall have no voting rights with respect to shares of Stock represented by Restricted Stock Units until the date of the issuance of the shares of Stock (as evidenced by the appropriate entry on the books of the Corporation or of a duly authorized transfer agent of the Corporation). Notwithstanding the foregoing, in the event that the Corporation declares a cash dividend on shares of Stock, on the payment date of the dividend, Participant will be credited with Dividend Equivalent Rights equal to the amount of the cash dividend per share multiplied by the number of Restricted Stock Units held by Participant on the dividend’s record date. The Dividend Equivalent Rights credited to Participant under the preceding sentence will be distributed to Participant at the same time as the underlying cash dividend is distributed to shareholders of the Corporation.
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3.
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Vesting; Effect of Termination of Service
.
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4.
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Terms and Conditions of Distribution
.
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5.
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Nontransferability
. Shares of Stock received in satisfaction of vested Restricted Stock Units may not be sold, transferred, exchanged, pledged, assigned, garnished, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution, or pursuant to a domestic relations order (as defined in Code Section 414(p)). Any effort to assign or transfer the rights under this Agreement will be wholly ineffective, and will be grounds for termination by the Committee of all rights of Participant under this Agreement.
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6.
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Administration
. The Committee administers the Plan. Participant’s rights under this Agreement are expressly subject to the terms and conditions of the Plan and to any guidelines the Committee adopts from time to time. The interpretation and construction by the Committee of the Plan and this Agreement, and such rules and regulations as may be adopted by the Committee for purposes of administering the Plan and this Agreement, will be final and binding upon Participant.
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7.
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Securities Law Requirements
. If at any time the Board or Committee determines that issuing Stock pursuant to this Agreement would violate applicable securities laws, the Corporation will not be required to issue such Stock. The Board or Committee may declare any provision of this Agreement or action of its own null and void, if it determines the provision or action fails to comply with applicable securities laws. The Corporation may require Participant to make written representations it deems necessary or desirable to comply with applicable securities laws.
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8.
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Payment of Withholding Taxes
. Distribution to Participant of shares of Stock under this Agreement will be subject to Federal income and other tax withholding (and state and local income tax withholding, if applicable) by the Corporation in respect of taxes on income realized by Participant. The Corporation may withhold the minimum statutorily required amounts from future paychecks to Participant, or may require that Participant deliver to the Corporation the amounts to be withheld. Participant agrees to allow the Corporation, upon any payment of shares of Stock to Participant under this Agreement, to withhold a portion of the shares of Stock otherwise deliverable to Participant having a Fair Market Value of the minimum statutorily required amount to be withheld, in satisfaction of any Federal income and other tax withholding (and any state and local income tax withholding, if applicable). Notwithstanding any provision herein to the contrary, in the event that any Restricted Stock Units become subject to tax withholding before the shares of Stock subject to the Restricted Stock Units would otherwise be delivered to the Participant, the Corporation may issue a sufficient number of whole shares of Stock with respect to the Restricted Stock Units that does not exceed the minimum statutorily required amount to be withheld, which shares of Stock shall be withheld by the Corporation to satisfy its withholding obligation, in accordance with and subject to the requirements of Section 409A.
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9.
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Restrictive Covenants
. Participant understands the global nature of the Corporation’s businesses and the effort the Corporation and the Chicago Board Options Exchange, Incorporated (together referred to in this Section as the “CBOE”) undertake to develop and protect their business and their competitive advantage. Accordingly, Participant agrees that the scope and duration of the restrictions described in this Agreement are reasonable and necessary to protect the legitimate business interests of the CBOE. Participant further agrees that during the period of Participant’s Service and for a period of two (2) years following Participant’s separation from Service, Participant shall not:
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10.
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Confidentiality
. Participant acknowledges that the Corporation or an Affiliate may disclose secret or confidential information to Participant during the period of Participant’s Service to enable Participant to perform his or her duties. Participant agrees that, subject to the following sentence, Participant shall not during his or her Service (except in connection with the proper performance of his or her duties) and thereafter, without the prior written consent of the Corporation, disclose to any person or entity any material or significant secret or confidential information concerning the business of the Corporation or an Affiliate that was obtained by Participant in the course of Participant’s Service. This paragraph shall not be applicable if and to the extent Participant is required to testify in a legislative, judicial or regulatory proceeding pursuant to an order of Congress, any state or local legislature, a judge, or an administrative law judge, or if such secret or confidential information is required to be disclosed by Participant by any law, regulation or order of any court or regulatory commission, department or agency. Participant further agrees that if Participant’s Service is terminated for any reason, Participant will not take, but will leave with the Corporation or an Affiliate, all records and papers and all matter of whatever nature that bears secret or confidential information of the Corporation or an Affiliate. For purposes of this Agreement, the term “secret or confidential information” shall include, but not be limited to, any and all records, notes, memoranda, data, writings, research, personnel information, customer information, clearing members’ information, the Corporation’s and any Affiliate’s financial information and plans, processes, methods, techniques, systems, formulas, patents, models, devices, compilations or any other information of whatever nature in the possession or control of the Corporation or an Affiliate, that has not been published or disclosed to the general public, the options industry or the commodities futures industry, provided that such term shall not include knowledge, skills, and information that is common to the trade or profession of Participant.
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11.
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Judicial Modification
. If the final judgment of a court of competent jurisdiction declares that any term or provision of Section 9 or 10 is invalid or unenforceable, the parties agree that (a) the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or geographic area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, (b) the parties shall request that the court exercise that power, and (c) this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment or decision may be appealed.
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12.
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Remedies
. Participant agrees that in the event of a breach or threatened breach of any of the covenants contained in Sections 9 or 10 of this Agreement, in addition to any other penalties or restrictions that may apply under any employment agreement, state law, or otherwise, Participant shall forfeit, upon written notice to such effect from the Corporation: (a) any and all Awards granted to him or her under the Plan and this Agreement, including vested Awards; and (b) the profit Participant has realized on the vesting of any Awards, which Participant may be required to repay to the Corporation). The forfeiture provisions of this Section 12 shall continue to apply, in accordance with their terms, after the provisions of any employment or other agreement between the Corporation and Participant have lapsed. Participant consents and agrees that if Participant violates or threatens to violate any provisions of Sections 9 or 10 of this Agreement, the Corporation or its successors in interest shall be entitled, in addition to any other remedies that they may have, including money damages, to an injunction to be issued by a court of competent jurisdiction restraining Participant from committing or continuing any violation of Sections 9 or 10. In the event that Participant is found to have breached any provision set forth in Section 9 of this Agreement, the time period provided for in that provision shall be deemed tolled (
i.e.
, it will not begin to run) for as long as Participant was in violation of that provision.
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13.
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Representations and Warranties
. Participant represents and warrants to the Corporation that Participant has received a copy of the Plan and this Agreement, has read and understands the terms of the Plan and this Agreement, and agrees to be bound by their terms and conditions in all respects.
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14.
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No Limitation on the Corporation’s Rights
. The granting of Restricted Stock Units under this Agreement shall not and will not in any way affect the Corporation’s right or power to make adjustments, reclassifications or changes in its capital or business structure or to merge, consolidate, reincorporate, dissolve, liquidate or sell or transfer all or any part of its business or assets.
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15.
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Plan and Agreement Not a Contract of Employment or Service
. Neither the Plan nor this Agreement is a contract of employment or Service, and no terms of Participant’s employment or Service will be affected in any way by the Plan, this Agreement or related instruments, except to the extent specifically expressed therein. Neither the Plan nor this Agreement will be construed as conferring any legal rights of Participant to continue to be employed or remain in Service,
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16.
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Entire Agreement and Amendment
. This Agreement and the Plan constitute the entire agreement between the parties hereto with respect to the Restricted Stock Units, and all prior oral and written representations are merged in this Agreement and the Plan. Notwithstanding the preceding sentence, this Agreement shall not in any way affect the terms and provisions of the Plan. This Agreement may be amended, modified, or terminated only in accordance with the Plan. The headings in this Agreement are inserted for convenience and identification only and are not intended to describe, interpret, define or limit the scope, extent, or intent of this Agreement or any provision hereof.
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17.
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Notice
. Any notice or other communication required or permitted under this Agreement must be in writing and must be delivered personally, sent by certified, registered or express mail, sent by overnight courier (at the sender’s expense), or (if from the Corporation or the Corporation’s stock plan administrator) by electronic mail. Notice will be deemed given (a) when delivered personally, (b) if mailed, three days after the date of deposit in the United States mail, (c) if sent by overnight courier, on the regular business day following the date sent, or (d) when electronically mailed. Notice to the Corporation should be sent to CBOE Holdings, Inc., 400 South LaSalle Street, Chicago, Illinois 60605, Attention: General Counsel. Notice to Participant should be sent to the mailing address and/or electronic mailing address set forth on the Corporation’s records. Either party may change the address to which the other party must give notice under this Section 17 by giving the other party written notice of such change, in accordance with the procedures described above or otherwise established by the Corporation or its stock plan administrator.
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18.
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Successors and Assigns
. The terms of this Agreement will be binding upon the Corporation and its successors and assigns.
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19.
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Governing Law
. To the extent not preempted by Federal law, the Plan, this Agreement, and documents evidencing rights relating to the Plan or this Agreement will be construed, administered and governed in all respects under and by the laws of the State of Delaware, without giving effect to its conflict of laws principles. If any provision of this Agreement will be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof will continue to be fully effective. The jurisdiction and venue for any disputes arising under, or any action brought to enforce (or otherwise relating to), this Agreement will be exclusively in the courts in the State of Illinois, County of Cook, including the Federal Courts located therein (should Federal jurisdiction exist).
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20.
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Plan Document Controls
. The rights granted under this Agreement are in all respects subject to the provisions set forth in the Plan to the same extent and with the same effect as if set forth fully in this Agreement. If the terms of this Agreement conflict with the terms of the Plan document, the Plan document will control.
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21.
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Counterparts
. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument.
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22.
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Waiver; Cumulative Rights
. The failure or delay of either party to require performance by the other party of any provision of this Agreement will not affect its right to require performance of such provision unless and until such performance has been waived in writing. Each right under this Agreement is cumulative and may be exercised in part or in whole from time to time.
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23.
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Tax Consequences
. Participant agrees to determine and be responsible for all tax consequences to Participant with respect to the Restricted Stock Units.
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24.
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Section 409A
.
The Restricted Stock Units granted hereunder are intended to comply with, or otherwise be exempt from, Section 409A, including the exceptions and exemptions for short term deferrals, stock rights, and separation pay arrangements. This Agreement and all Restricted Stock Units shall be administered, interpreted, and construed in a manner consistent with Section 409A. Should any provision of this Agreement, or any other agreement or arrangement contemplated by this Agreement, be found not to comply with, or otherwise be exempt from, the provisions of Section 409A, such provision shall be modified and given effect (retroactively if necessary), in the sole discretion of the Corporation, and without the consent of Participant, in such manner as the Corporation determines to be necessary or appropriate to comply with, or to effectuate an exemption from, Section 409A. Notwithstanding the forgoing, no provision of this Agreement, or any other agreement or arrangement contemplated by this Agreement shall be construed as a guarantee by the Corporation of any particular tax effect to Participant. Each payment made under this Agreement shall be designated as a separate payment within the meaning of Section 409A. Any payment that is subject to Section 409A and payable upon Participant’s termination of employment or other similar event shall not be made unless Participant has experienced a “separation from service” as defined under Section 409A. Any payment subject to Section 409A that is to be made upon a “separation from service” to Participant on any date when he or she is a “specified employee” as defined under Section 409A shall not be paid before the date that is six (6) months following Participant’s “separation from service” or, if earlier, Participant’s death.
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25.
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Awards Subject to the Corporation’s Recovery of Funds Policy
. Notwithstanding anything in this Agreement to the contrary, the Restricted Stock Units covered by this Agreement shall be subject to the Corporation’s compensation recovery policy, as may be in effect from time to time, including, without limitation, the provisions of any such policy required by Section 10D of the Exchange Act and any applicable rules or regulations issued by the U.S. Securities and Exchange Commission or any national securities exchange or national securities association on which the Stock may be traded.
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_________________________________
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Participant’s Name
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_________________________________
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Participant’s Signature
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1.
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Award
. The Corporation hereby awards to Participant [___] Restricted Stock Units (the “
Restricted Stock Units
”). The Restricted Stock Units will be subject to the terms and conditions of the Plan and this Agreement. Each Restricted Stock Unit is a notional amount that represents one unvested share of Stock and entitles Participant, subject to the terms of this Agreement, to receive a share of Stock if and when the Restricted Stock Unit vests.
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2.
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No Rights as Stockholder; Dividend Equivalents
. Participant shall have no voting rights with respect to shares of Stock represented by Restricted Stock Units until the date of the issuance of the shares of Stock (as evidenced by the appropriate entry on the books of the Corporation or of a duly authorized transfer agent of the Corporation). Notwithstanding the foregoing, in the event that the Corporation declares a cash dividend on shares of Stock, on the payment date of the dividend, Participant will be credited with Dividend Equivalent Rights equal to the amount of the cash dividend per share multiplied by the number of Restricted Stock Units held by Participant on the dividend’s record date. The Dividend Equivalent Rights credited to Participant under the preceding sentence will be deemed to be reinvested in additional Restricted Stock Units, which will be subject to the same terms regarding vesting, forfeiture, and distribution as Restricted Stock Units awarded to Participant under this Agreement.
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3.
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Performance Period
. The Performance Period for the Restricted Stock Units shall be the three (3) year period commencing on January 1, 2014 and ending on December 31, 2016.
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4.
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Vesting; Effect of Termination of Service
.
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5.
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Terms and Conditions of Distribution
.
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6.
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Nontransferability
. Shares of Stock received in satisfaction of vested Restricted Stock Units may not be sold, transferred, exchanged, pledged, assigned, garnished, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution, or pursuant to a domestic relations order (as defined in Code Section 414(p)). Any effort to assign or transfer the rights under this Agreement will be wholly ineffective, and will be grounds for termination by the Committee of all rights of Participant under this Agreement.
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7.
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Administration
. The Committee administers the Plan. Participant’s rights under this Agreement are expressly subject to the terms and conditions of the Plan and to any guidelines the Committee adopts from time to time. The interpretation and construction by the Committee of the Plan and this Agreement, and such rules and regulations as may be adopted by the Committee for purposes of administering the Plan and this Agreement, will be final and binding upon Participant.
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8.
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Securities Law Requirements
. If at any time the Board or Committee determines that issuing Stock pursuant to this Agreement would violate applicable securities laws, the Corporation will not be required to issue such Stock. The Board or Committee may declare any provision of this Agreement or action of its own null and void, if it determines the provision or action fails to comply with applicable securities laws. The Corporation may require Participant to make written representations it deems necessary or desirable to comply with applicable securities laws.
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9.
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Payment of Withholding Taxes
. Distribution to Participant of shares of Stock under this Agreement will be subject to Federal income and other tax withholding (and state and local income tax withholding, if applicable) by the Corporation in respect of taxes on income realized by Participant. The Corporation may withhold the minimum statutorily required amounts from future paychecks to Participant, or may require that Participant deliver to the Corporation the amounts to be withheld. Participant agrees to allow the Corporation, upon any payment of shares of Stock to Participant under this Agreement, to withhold a portion of the shares of Stock otherwise deliverable to Participant having a Fair Market Value of the minimum statutorily required amount to be withheld, in satisfaction of any Federal income and other tax withholding (and any state and local income tax withholding, if applicable). Notwithstanding any provision herein to the contrary, in the event that any Restricted Stock Units become subject to tax withholding before the shares of Stock subject to the Restricted Stock Units would otherwise be delivered to the Participant, the Corporation may issue a sufficient number of whole shares of Stock with respect to the Restricted Stock Units that does not exceed the minimum statutorily required amount to be withheld, which shares of Stock shall be withheld by the Corporation to satisfy its withholding obligation, in accordance with and subject to the requirements of Section 409A.
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10.
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Restrictive Covenants
. Participant understands the global nature of the Corporation’s businesses and the effort the Corporation and the Chicago Board Options Exchange, Incorporated (together referred to in this Section as the “CBOE”) undertake to develop and protect their business and their competitive advantage. Accordingly, Participant agrees that the scope and duration of the restrictions described in this Agreement are reasonable and necessary to protect the legitimate business interests of the CBOE. Participant further agrees that during the period of Participant’s Service and for a period of two (2) years following Participant’s separation from Service, Participant shall not:
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11.
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Confidentiality
. Participant acknowledges that the Corporation or an Affiliate may disclose secret or confidential information to Participant during the period of Participant’s Service to enable Participant to perform his or her duties. Participant agrees that, subject to the following sentence, Participant shall not during his or her Service (except in connection with the proper performance of his or her duties) and thereafter, without the prior written consent of the Corporation, disclose to any person or entity any material or significant secret or confidential information concerning the business of the Corporation or an Affiliate that was obtained by Participant in the course of Participant’s Service. This paragraph shall not be applicable if and to the extent Participant is required to testify in a legislative, judicial or regulatory proceeding pursuant to an order of Congress, any state or local legislature, a judge, or an administrative law judge, or if such secret or confidential information is required to be disclosed by Participant by any law, regulation or order of any court or regulatory commission, department or agency. Participant further agrees that if Participant’s Service is terminated for any reason, Participant will not take, but will leave with the Corporation or an Affiliate, all records and papers and all matter of whatever nature that bears secret or confidential information of the Corporation or an Affiliate. For purposes of this Agreement, the term “secret or confidential information” shall include, but not be limited to, any and all records, notes, memoranda, data, writings, research, personnel information, customer information, clearing members’ information, the Corporation’s and any Affiliate’s financial information and plans, processes, methods, techniques, systems, formulas, patents, models, devices, compilations or any other information of whatever nature in the possession or control of the Corporation or an Affiliate, that has not been published or disclosed to the general public, the options industry or the commodities futures industry, provided that such term shall not include knowledge, skills, and information that is common to the trade or profession of Participant.
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12.
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Judicial Modification
. If the final judgment of a court of competent jurisdiction declares that any term or provision of Section 10 or 11 is invalid or unenforceable, the parties agree that (a) the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or geographic area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, (b) the parties shall request that the court exercise that power, and (c) this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment or decision may be appealed.
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13.
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Remedies
. Participant agrees that in the event of a breach or threatened breach of any of the covenants contained in Sections 10 or 11 of this Agreement, in addition to any other penalties or restrictions that may apply under any employment agreement, state law, or otherwise, Participant shall forfeit, upon written notice to such effect from the Corporation: (a) any and all Awards granted to him or her under the Plan and this Agreement, including vested Awards; and (b) the profit Participant has realized on the vesting of any Awards, which Participant may be required to repay to the Corporation). The forfeiture provisions of this Section 13 shall continue to apply, in accordance with their terms, after the provisions of any employment or other agreement between the Corporation and Participant have lapsed. Participant consents and agrees that if Participant violates or threatens to violate any provisions of Sections 10 or 11 of this Agreement, the Corporation or its successors in interest shall be entitled, in addition to any other remedies that they may have, including money damages, to an injunction to be issued by a court of competent jurisdiction restraining Participant from committing or continuing any violation of Sections 10 or 11. In the event that Participant is found to have breached any provision set forth in Section 10 of this Agreement, the time period provided for in that provision shall be deemed tolled (
i.e.
, it will not begin to run) for as long as Participant was in violation of that provision.
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14.
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Representations and Warranties
. Participant represents and warrants to the Corporation that Participant has received a copy of the Plan and this Agreement, has read and understands the terms of the Plan and this Agreement, and agrees to be bound by their terms and conditions in all respects.
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15.
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No Limitation on the Corporation’s Rights
. The granting of Restricted Stock Units under this Agreement shall not and will not in any way affect the Corporation’s right or power to make adjustments, reclassifications or changes in its capital or business structure or to merge, consolidate, reincorporate, dissolve, liquidate or sell or transfer all or any part of its business or assets.
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16.
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Plan and Agreement Not a Contract of Employment or Service
. Neither the Plan nor this Agreement is a contract of employment or Service, and no terms of Participant’s employment or Service will be affected in any way by the Plan, this Agreement or related instruments, except to the extent specifically expressed therein. Neither the Plan nor this Agreement will be construed as conferring any legal rights of Participant to continue to be employed or remain in Service, nor will it interfere with the Corporation’s or any Affiliate’s right to discharge Participant or to deal with Participant regardless of the existence of the Plan or this Agreement.
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17.
|
Entire Agreement and Amendment
. This Agreement and the Plan constitute the entire agreement between the parties hereto with respect to the Restricted Stock Units, and all prior oral and written representations are merged in this Agreement and the Plan. Notwithstanding the preceding sentence, this Agreement shall not in any way affect the terms and provisions of the Plan. This Agreement may be amended, modified, or terminated only in accordance with the Plan. The headings in this Agreement are inserted for convenience and identification only and are not intended to describe, interpret, define or limit the scope, extent, or intent of this Agreement or any provision hereof.
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18.
|
Notice
. Any notice or other communication required or permitted under this Agreement must be in writing and must be delivered personally, sent by certified, registered or express mail, sent by overnight courier (at the sender’s expense), or (if from the Corporation or the Corporation’s stock plan administrator) by electronic mail. Notice will be deemed given (a) when delivered personally, (b) if mailed, three days after the date of deposit in the United States mail, (c) if sent by overnight courier, on the regular business day following the date sent, or (d) when electronically mailed. Notice to the Corporation should be sent to CBOE Holdings, Inc., 400 South LaSalle Street, Chicago, Illinois 60605, Attention: General Counsel. Notice to Participant should be sent to the mailing address and/or electronic mailing address set forth on the Corporation’s records. Either party may change the address to which the other party must give notice under this Section 18 by giving the other party written notice of such change, in accordance with the procedures described above or otherwise established by the Corporation or its stock plan administrator.
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19.
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Successors and Assigns
. The terms of this Agreement will be binding upon the Corporation and its successors and assigns.
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20.
|
Governing Law
. To the extent not preempted by Federal law, the Plan, this Agreement, and documents evidencing rights relating to the Plan or this Agreement will be construed, administered and governed in all respects under and by the laws of the State of Delaware, without giving effect to its conflict of laws principles. If any provision of this Agreement will be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof will continue to be fully effective. The jurisdiction and venue for any disputes arising under, or any action brought to enforce (or otherwise relating to), this Agreement will be exclusively in the courts in the State of Illinois, County of Cook, including the Federal Courts located therein (should Federal jurisdiction exist).
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21.
|
Plan Document Controls
. The rights granted under this Agreement are in all respects subject to the provisions set forth in the Plan to the same extent and with the same effect as if set forth fully in this Agreement. If the terms of this Agreement conflict with the terms of the Plan document, the Plan document will control.
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22.
|
Counterparts
. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument.
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23.
|
Waiver; Cumulative Rights
. The failure or delay of either party to require performance by the other party of any provision of this Agreement will not affect its right to require performance of such provision unless and until such performance has been waived in writing. Each right under this Agreement is cumulative and may be exercised in part or in whole from time to time.
|
24.
|
Tax Consequences
. Participant agrees to determine and be responsible for all tax consequences to Participant with respect to the Restricted Stock Units.
|
25.
|
Section 409A
.
The Restricted Stock Units granted hereunder are intended to comply with, or otherwise be exempt from, Section 409A, including the exceptions and exemptions for short term deferrals, stock rights, and separation pay arrangements. This Agreement and all Restricted Stock Units shall be administered, interpreted, and construed in a manner consistent with Section 409A. Should any provision of this Agreement, or any other agreement or arrangement contemplated by this Agreement, be found not to comply with, or otherwise be exempt from, the provisions of Section 409A, such provision shall be modified and given effect (retroactively if necessary), in the sole discretion of the Corporation, and without the consent of Participant, in such manner as the Corporation determines to be necessary or appropriate to comply with, or to effectuate an exemption from, Section 409A. Notwithstanding the forgoing, no provision of this Agreement, or any other agreement or arrangement contemplated by this Agreement shall be construed as a guarantee by the Corporation of any particular tax effect to Participant. Each payment made under this Agreement shall be designated as a separate payment within the meaning of Section 409A. Any payment that is subject to Section 409A and payable upon Participant’s termination of employment or other similar event shall not be made unless Participant has experienced a “separation from service” as defined under Section 409A. Any payment subject to Section 409A that
|
26.
|
Awards Subject to the Corporation’s Recovery of Funds Policy
. Notwithstanding anything in this Agreement to the contrary, the Restricted Stock Units covered by this Agreement shall be subject to the Corporation’s compensation recovery policy, as may be in effect from time to time, including, without limitation, the provisions of any such policy required by Section 10D of the Exchange Act and any applicable rules or regulations issued by the U.S. Securities and Exchange Commission or any national securities exchange or national securities association on which the Stock may be traded.
|
_________________________________
|
|
|
Participant’s Name
|
|
|
_________________________________
|
|
|
Participant’s Signature
|
|
|
|
|
|
TSR Percentile Attained
|
Percentage of Restricted Stock Units That Vest
|
[__] percentile (“
Maximum
”) or greater
|
[__]%
|
[__] percentile (“
Target
”)
|
[100]%
|
[__] percentile (“
Threshold
”)
|
[__]%
|
1.
|
Award
. The Corporation hereby awards to Participant [___] Restricted Stock Units (the “
Restricted Stock Units
”). The Restricted Stock Units will be subject to the terms and conditions of the Plan and this Agreement. Each Restricted Stock Unit is a notional amount that represents one unvested share of Stock and entitles Participant, subject to the terms of this Agreement, to receive a share of Stock if and when the Restricted Stock Unit vests.
|
2.
|
No Rights as Stockholder; Dividend Equivalents
. Participant shall have no voting rights with respect to shares of Stock represented by Restricted Stock Units until the date of the issuance of the shares of Stock (as evidenced by the appropriate entry on the books of the Corporation or of a duly authorized transfer agent of the Corporation). Notwithstanding the foregoing, in the event that the Corporation declares a cash dividend on shares of Stock, on the payment date of the dividend, Participant will be credited with Dividend Equivalent Rights equal to the amount of the cash dividend per share multiplied by the number of Restricted Stock Units held by Participant on the dividend’s record date. The Dividend Equivalent Rights credited to Participant under the preceding sentence will be deemed to be reinvested in additional Restricted Stock Units, which will be subject to the same terms regarding vesting, forfeiture, and distribution as Restricted Stock Units awarded to Participant under this Agreement.
|
3.
|
Performance Period
. The Performance Period for the Restricted Stock Units shall be the three (3) year period commencing on January 1, 2014 and ending on December 31, 2016.
|
4.
|
Vesting; Effect of Termination of Service
.
|
5.
|
Terms and Conditions of Distribution
.
|
6.
|
Nontransferability
. Shares of Stock received in satisfaction of vested Restricted Stock Units may not be sold, transferred, exchanged, pledged, assigned, garnished, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution, or pursuant to a domestic relations order (as defined in Code Section 414(p)). Any effort to assign or transfer the rights under this Agreement will be wholly ineffective, and will be grounds for termination by the Committee of all rights of Participant under this Agreement.
|
7.
|
Administration
. The Committee administers the Plan. Participant’s rights under this Agreement are expressly subject to the terms and conditions of the Plan and to any guidelines the Committee adopts from time to time. The interpretation and construction by the Committee of the Plan and this Agreement, and such rules and regulations as may be adopted by the Committee for purposes of administering the Plan and this Agreement, will be final and binding upon Participant.
|
8.
|
Securities Law Requirements
. If at any time the Board or Committee determines that issuing Stock pursuant to this Agreement would violate applicable securities laws, the Corporation will not be required to issue such Stock. The Board or Committee may declare any provision of this Agreement or action of its own null and void, if it determines the provision or action fails to comply with applicable securities laws. The Corporation may require Participant to make written representations it deems necessary or desirable to comply with applicable securities laws.
|
9.
|
Payment of Withholding Taxes
. Distribution to Participant of shares of Stock under this Agreement will be subject to Federal income and other tax withholding (and state and local income tax withholding, if applicable) by the Corporation in respect of taxes on income realized by Participant. The Corporation may withhold the minimum statutorily required amounts from future paychecks to Participant, or may require that Participant deliver to the Corporation the amounts to be withheld. Participant agrees to allow the Corporation, upon any payment of shares of Stock to Participant under this Agreement, to withhold a portion of the shares of Stock otherwise deliverable to Participant having a Fair Market Value of the minimum statutorily required amount to be withheld, in satisfaction of any Federal income and other tax withholding (and any state and local income tax withholding, if applicable). Notwithstanding any provision herein to the contrary, in the event that any Restricted Stock Units become subject to tax withholding before the shares of Stock subject to the Restricted Stock Units would otherwise be delivered to the Participant, the Corporation may issue a sufficient number of whole shares of Stock with respect to the Restricted Stock Units that does not exceed the minimum statutorily required amount to be withheld, which shares of Stock shall be withheld by the Corporation to satisfy its withholding obligation, in accordance with and subject to the requirements of Section 409A.
|
10.
|
Restrictive Covenants
. Participant understands the global nature of the Corporation’s businesses and the effort the Corporation and the Chicago Board Options Exchange, Incorporated (together referred to in this Section as the “CBOE”) undertake to develop and protect their business and their competitive advantage. Accordingly, Participant agrees that the scope and duration of the restrictions described in this Agreement are reasonable and necessary to protect the legitimate business interests of the CBOE. Participant further agrees that during the period of Participant’s Service and for a period of two (2) years following Participant’s separation from Service, Participant shall not:
|
11.
|
Confidentiality
. Participant acknowledges that the Corporation or an Affiliate may disclose secret or confidential information to Participant during the period of Participant’s Service to enable Participant to perform his or her duties. Participant agrees that, subject to the following sentence, Participant shall not during his or her Service (except in connection with the proper performance of his or her duties) and thereafter, without the prior written consent of the Corporation, disclose to any person or entity any material or significant secret or confidential information concerning the business of the Corporation or an Affiliate that was obtained by Participant in the course of Participant’s Service. This paragraph shall not be applicable if and to the extent Participant is required to testify in a legislative, judicial or regulatory proceeding pursuant to an order of Congress, any state or local legislature, a judge, or an administrative law judge, or if such secret or confidential information is required to be disclosed by Participant by any law, regulation or order of any court or regulatory commission, department or agency. Participant further agrees that if Participant’s Service is terminated for any reason, Participant will not take, but will leave with the Corporation or an Affiliate, all records and papers and all matter of whatever nature that bears secret or confidential information of the Corporation or an Affiliate. For purposes of this Agreement, the term “secret or confidential information” shall include, but not be limited to, any and all records, notes, memoranda, data, writings, research, personnel information, customer information, clearing members’ information, the Corporation’s and any Affiliate’s financial information and plans, processes, methods, techniques, systems, formulas, patents, models, devices, compilations or any other information of whatever nature in the possession or control of the Corporation or an Affiliate, that has not been published or disclosed to the general public, the options industry or the commodities futures industry, provided that such term shall not include knowledge, skills, and information that is common to the trade or profession of Participant.
|
12.
|
Judicial Modification
. If the final judgment of a court of competent jurisdiction declares that any term or provision of Section 10 or 11 is invalid or unenforceable, the parties agree that (a) the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or geographic area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, (b) the parties shall request that the court exercise that power, and (c) this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment or decision may be appealed.
|
13.
|
Remedies
. Participant agrees that in the event of a breach or threatened breach of any of the covenants contained in Sections 10 or 11 of this Agreement, in addition to any other penalties or restrictions that may apply under any employment agreement, state law, or otherwise, Participant shall forfeit, upon written notice to such effect from the Corporation: (a) any and all Awards granted to him or her under the Plan and this Agreement, including vested Awards; and (b) the profit Participant has realized on the vesting of any Awards, which Participant may be required to repay to the Corporation). The forfeiture provisions of this Section 13 shall continue to apply, in accordance with their terms, after the provisions of any employment or other agreement between the Corporation and Participant have lapsed. Participant consents and agrees that if Participant violates or threatens to violate any provisions of Sections 10 or 11 of this Agreement, the Corporation or its successors in interest shall be entitled, in addition to any other remedies that they may have, including money damages, to an injunction to be issued by a court of competent jurisdiction restraining Participant from committing or continuing any violation of Sections 10 or 11. In the event that Participant is found to have breached any provision set forth in Section 10 of this Agreement, the time period provided for in that provision shall be deemed tolled (
i.e.
, it will not begin to run) for as long as Participant was in violation of that provision.
|
14.
|
Representations and Warranties
. Participant represents and warrants to the Corporation that Participant has received a copy of the Plan and this Agreement, has read and understands the terms of the Plan and this Agreement, and agrees to be bound by their terms and conditions in all respects.
|
15.
|
No Limitation on the Corporation’s Rights
. The granting of Restricted Stock Units under this Agreement shall not and will not in any way affect the Corporation’s right or power to make adjustments, reclassifications or changes in its capital or business structure or to merge, consolidate, reincorporate, dissolve, liquidate or sell or transfer all or any part of its business or assets.
|
16.
|
Plan and Agreement Not a Contract of Employment or Service
. Neither the Plan nor this Agreement is a contract of employment or Service, and no terms of Participant’s employment or Service will be affected in any way by the Plan, this Agreement or related instruments, except to the extent specifically expressed therein. Neither the Plan nor this Agreement will be construed as conferring any legal rights of Participant to continue to be employed or remain in Service, nor will it interfere with the Corporation’s or any Affiliate’s right to discharge Participant or to deal with Participant regardless of the existence of the Plan or this Agreement.
|
17.
|
Entire Agreement and Amendment
. This Agreement and the Plan constitute the entire agreement between the parties hereto with respect to the Restricted Stock Units, and all prior oral and written representations are merged in this Agreement and the Plan. Notwithstanding the preceding sentence, this Agreement shall not in any way affect the terms and provisions of the Plan. This Agreement may be amended, modified, or terminated only in accordance with the Plan. The headings in this Agreement are inserted for convenience and identification only and are not intended to describe, interpret, define or limit the scope, extent, or intent of this Agreement or any provision hereof.
|
18.
|
Notice
. Any notice or other communication required or permitted under this Agreement must be in writing and must be delivered personally, sent by certified, registered or express mail, sent by overnight courier (at the sender’s expense), or (if from the Corporation or the Corporation’s stock plan administrator) by electronic mail. Notice will be deemed given (a) when delivered personally, (b) if mailed, three days after the date of deposit in the United States mail, (c) if sent by overnight courier, on the regular business day following the date sent, or (d) when electronically mailed. Notice to the Corporation should be sent to CBOE Holdings, Inc., 400 South LaSalle Street, Chicago, Illinois 60605, Attention: General Counsel. Notice to Participant should be sent to the mailing address and/or electronic mailing address set forth on the Corporation’s records. Either party may change the address to which the other party must give notice under this Section 18 by giving the other party written notice of such change, in accordance with the procedures described above or otherwise established by the Corporation or its stock plan administrator.
|
19.
|
Successors and Assigns
. The terms of this Agreement will be binding upon the Corporation and its successors and assigns.
|
20.
|
Governing Law
. To the extent not preempted by Federal law, the Plan, this Agreement, and documents evidencing rights relating to the Plan or this Agreement will be construed, administered and governed in all respects under and by the laws of the State of Delaware, without giving effect to its conflict of laws principles. If any provision of this Agreement will be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof will continue to be fully effective. The jurisdiction and venue for any disputes arising under, or any action brought to enforce (or otherwise relating to), this Agreement will be exclusively in the courts in the State of Illinois, County of Cook, including the Federal Courts located therein (should Federal jurisdiction exist).
|
21.
|
Plan Document Controls
. The rights granted under this Agreement are in all respects subject to the provisions set forth in the Plan to the same extent and with the same effect as if set forth fully in this Agreement. If the terms of this Agreement conflict with the terms of the Plan document, the Plan document will control.
|
22.
|
Counterparts
. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument.
|
23.
|
Waiver; Cumulative Rights
. The failure or delay of either party to require performance by the other party of any provision of this Agreement will not affect its right to require performance of such provision unless and until such performance has been waived in writing. Each right under this Agreement is cumulative and may be exercised in part or in whole from time to time.
|
24.
|
Tax Consequences
. Participant agrees to determine and be responsible for all tax consequences to Participant with respect to the Restricted Stock Units.
|
25.
|
Section 409A
.
The Restricted Stock Units granted hereunder are intended to comply with, or otherwise be exempt from, Section 409A, including the exceptions and exemptions for short term deferrals, stock rights, and separation pay arrangements. This Agreement and all Restricted Stock Units shall be administered, interpreted, and construed in a manner consistent with Section 409A. Should any provision of this Agreement, or any other agreement or arrangement contemplated by this Agreement, be found not to comply with, or otherwise be exempt from, the provisions of Section 409A, such provision shall be modified and given effect (retroactively if necessary), in the sole discretion of the Corporation, and without the consent of Participant, in such manner as the Corporation determines to be necessary or appropriate to comply with, or to effectuate an exemption from, Section 409A. Notwithstanding the forgoing, no provision of this Agreement, or any other agreement or arrangement contemplated by this Agreement shall be construed as a guarantee by the Corporation of any particular tax effect to Participant. Each payment made under this Agreement shall be designated as a separate payment within the meaning of Section 409A. Any payment that is subject to Section 409A and payable upon Participant’s termination of employment or other similar event shall not be made unless Participant has experienced a “separation from service” as defined under Section 409A. Any payment subject to Section 409A that
|
26.
|
Awards Subject to the Corporation’s Recovery of Funds Policy
. Notwithstanding anything in this Agreement to the contrary, the Restricted Stock Units covered by this Agreement shall be subject to the Corporation’s compensation recovery policy, as may be in effect from time to time, including, without limitation, the provisions of any such policy required by Section 10D of the Exchange Act and any applicable rules or regulations issued by the U.S. Securities and Exchange Commission or any national securities exchange or national securities association on which the Stock may be traded.
|
_________________________________
|
|
|
Participant’s Name
|
|
|
_________________________________
|
|
|
Participant’s Signature
|
|
|
|
|
|
Earnings Per Share Attained
|
Percentage of Restricted Stock Units That Vest
|
$[__] (“
Maximum
”) or greater
|
[__]%
|
$[__] (“
Target
”)
|
[100]%
|
$[__] (“
Threshold
”)
|
[__]%
|
Name of Subsidiary
|
|
Jurisdiction of Organization
|
CBOE Futures Exchange, LLC
|
|
Delaware
|
CBOE, LLC
|
|
Delaware
|
Chicago Board Options Exchange, Incorporated
|
|
Delaware
|
Chicago Options Exchange Building Corporation
|
|
Delaware
|
DerivaTech Corporation
|
|
Illinois
|
Market Data Express, LLC
|
|
Delaware
|
The Options Exchange, Incorporated
|
|
Delaware
|
C2 Options Exchange, Incorporated
|
|
Delaware
|
|
|
|
1.
|
I have reviewed this Annual Report on Form 10-K for the year ended
December 31, 2013
of CBOE Holdings, Inc. (the "registrant");
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ EDWARD T. TILLY
|
||
Name:
|
|
Edward T. Tilly
|
Title:
|
|
Chief Executive Officer
|
1.
|
I have reviewed this Annual Report on Form 10-K for the year ended
December 31, 2013
of CBOE Holdings, Inc. (the "registrant");
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ ALAN J. DEAN
|
||
Name:
|
|
Alan J. Dean
|
Title:
|
|
Executive Vice President and Chief Financial Officer
|
/s/ EDWARD T. TILLY
|
Edward T. Tilly
|
February 21, 2014
|
/s/ ALAN J. DEAN
|
Alan J. Dean
|
February 21, 2014
|