The biggest U.S. Options exchange is exercising its option to go public, to widespread applause.
CBOE Holdings, the parent of the Chicago Board Options Exchange, priced its $339 million IPO Monday evening at $29 a share, the top of its expected range. The stock surged 15% to $33 and change Tuesday morning when trading opened.
The company will raise $260 million in the offering, while stock-selling CBOE members will take in $56 million. Underwriters led by Goldman Sachs will get $23 million.
The CBOE becomes the latest U.S. Exchange to cash in on the expansion of financial markets with an IPO. It joins NYSE Euronext, the Nasdaq, and the CME, parent of the Chicago Mercantile Exchange, as onetime member-owned companies now seeking to maximize profits as public companies.
Some observers say this shift set the stage for recent market failures, such as last month’s flash crash, by reducing the exchanges’ incentives to work together to protect investors.
That aside, exchanges like the CBOE say they are in a market sweet spot as investors flock to products like index options and exchange-traded funds, which are mutual funds that trade like stocks.
Among the CBOE’s most popular products are the SPX, which tracks the performance of the S&P 500 index, and the VIX, which some use as a proxy for market fear. There has been a lot of that to track lately, and fees from index options surged 33% from a year ago in the first quarter.
But the other half of CBOE’s business — options on stocks and exchange-traded funds — has been shrinking, with fees on equities slipping 7% in the first quarter and those on ETFs plunging 26%. The company’s profit actually fell from a year ago in the first quarter, to $23 million from $24 million a year earlier.
For now, the CBOE offering is the 20th biggest IPO of the past year, according to data from Renaissance Capital — and, if early trading is any indication, it’s one of the hottest.