Summary
Chicago Mercantile Exchange Holdings Inc. (CME) has filed an 8-K report on August 27, 2002, announcing a significant settlement in a patent litigation case. The company, along with the Chicago Board of Trade (CBOT), has reached an agreement with eSpeed, Inc., a subsidiary of Cantor Fitzgerald, to resolve disputes concerning the Wagner patent on automated futures trading systems. This settlement, which involves a combined payment of $30 million over five years ($15 million from CME and $15 million from CBOT), aims to end lengthy and costly legal proceedings. For CME investors, this settlement marks a pivotal step in moving past a significant legal overhang. The company will recognize an after-tax charge of approximately 28 cents per diluted share in the third quarter of 2002, impacting short-term profitability but providing long-term clarity. The agreement also extends to futures and options on futures related to individual stocks and narrow-based stock indexes offered by OneChicago LLC, a joint venture of CME, CBOT, and the Chicago Board Options Exchange. This resolution allows CME to redirect its focus and resources towards enhancing its electronic trading platform, GLOBEX, and pursuing future strategic initiatives.
Key Highlights
- 1CME and CBOT have settled patent litigation with eSpeed, Inc. concerning the Wagner patent on automated futures trading systems.
- 2The settlement involves a total payment of $30 million, with CME and CBOT each contributing $15 million over a five-year period.
- 3CME will record a charge of approximately 28 cents per diluted share in the third quarter of 2002 related to the settlement.
- 4The settlement agreement includes releases from all legal claims between the parties without admission of liability.
- 5The resolution also covers futures and options on futures on individual stocks and narrow-based stock indexes offered by OneChicago LLC.
- 6CME plans to reinvest in the speed, reliability, and functionality of its GLOBEX electronic trading platform following this settlement.