Investor says CBOE could fetch $3.5 billion

By Phil Wahba

NEW YORK (Reuters) - Prominent exchanges investor Thomas Caldwell said on Wednesday that the Chicago Board Options Exchange could fetch as much as $3.5 billion once it settles a long-standing legal dispute that has delayed its plans to become a shareholder-owned exchange.

Caldwell, the chairman of Caldwell Financial LLC, which offers a mutual fund specializing in exchanges for Canadian investors and has stakes in CBOE, NYSE Euronext (NYX.N) and CME Group Inc (CME.O) and other major exchange operators, said that CBOE, the largest options market in the United States, could entice a major suitor, but at a steep price.

"CBOE is a big exchange. It's a prized property, so when it becomes available, you know everyone will be scratching their heads and sharpening their pencils and looking at it," Caldwell said at the Reuters Global Exchanges and Trading Summit in New York.

Caldwell's high net worth fund holds 11 CBOE seats.

According to CBOE's web site, one of CBOE's 930 seats sold for $1.77 million last week, meaning the option mart is worth at least $1.7 billion.

But because CBOE is so dominant in its industry -- its market share was 31.9 percent from January to April, far ahead of its nearest rival, and it has proprietary products such as its well-known VIX Volatility Index .VIX, it should command a large premium.

"It could be as much as $6 billion, but $3 billion to $3.5 billion would be a base of some kind," Caldwell said.

"It is a unique property."