UPDATE 1-CBOE expects to be fined by U.S. SEC for shortcomings

05/08/2013

By Ann Saphir

SAN FRANCISCO, May 8 (Reuters) - CBOE Holdings Inc expects to be fined as much as $10 million to resolve a probe by federal authorities into its duties as a self-policing organization.

It also expects any settlement to require it to beef up its compliance and regulatory programs, CBOE said in its quarterly filing with the U.S. Securities and Exchange Commission.

The operator of the oldest U.S. stock-options trading venue previously said it was in talks with the SEC to settle the probe, which is centered on the exchange's role as a front-line overseer of Chicago brokerage OptionsXpress, now owned by Charles Schwab Corp.

"We believe that any resolution of this matter will include a monetary penalty and will require CBOE to make additional changes to its compliance and regulatory programs and procedures," CBOE said in the filing, dated Tuesday.

The wording might suggest CBOE has moved closer to settling the probe.

A CBOE filing last week said discussions on a resolution of the matter "remain ongoing" and "an agreement has not been reached with the SEC staff."

The description in this week's filing omitted any reference to settlement discussions and did not note the absence of an agreement with the SEC staff.

Instead it repeated that "any agreement will be subject to the approval by the Commissioners of the SEC."

A CBOE spokeswoman declined to comment on the investigation.

The SEC has historically refrained from fining exchanges for misdeeds. It levied its first monetary penalty on an exchange last September, fining NYSE Euronext $5 million to settle SEC allegations that it gave some customers an early look at data.

CBOE has made some changes to its compliance division in response to the probe and earlier this year said it would remove board directors with ties to trading firms.



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