UPDATE 2-Delaware judge OKs proposed CBOE equity settlement

* CBOE aims to move forward with demutualization

* Ruling subject to potential appeals (Adds comments from seat-holders, details)

By Doris Frankel and Jonathan Spicer

CHICAGO/NEW YORK, June 3 (Reuters) - A Delaware judge approved a proposed settlement on Wednesday between the Chicago Board Options Exchange and Chicago Board of Trade members over who is entitled to an equity stake in the top U.S. options mart, opening the door for the CBOE to merge or list shares.

The Delaware Chancery Court "overruled all of the objections to the terms of the settlement and found that the settlement is fair and reasonable," CBOE said in a memo to its members.

Barring any appeals and following a vote by its members, the CBOE can now move to become a shareholder-owned company from a membership entity -- a process called demutualization that the exchange has sought for years.

Any appeals must be filed within 30 days, the CBOE said in the memo. Appeals would go to the Delaware Supreme Court.

The protracted legal dispute over ownership has delayed the largest U.S. options exchange from going public or merging with another company.

"It clears the air for CBOE," said Thomas Caldwell, founder and chairman of Caldwell Financial, a major CBOE seat-holder .