Annual Report 2006

The Marketplace For Options

2006 Annual Report Chicago Board Options Exchange

2006 was an historic year for CBOE on many levels. The record-setting numbers tell a great story — the leading U.S. options exchange in volume, a third consecutive year of record volume, increased market share and seat prices — but numbers don’t tell the whole story at CBOE.

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CBOE will embark on a new branding campaign in 2007 in which the Exchange will be communicating to the world that CBOE is a vital necessity in the options marketplace for which there is no substitute. Additional details may be found on page 18 of this Annual Report.

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Letter from the Office of the Chairman

Several long-term initiatives were set in place during 2006 that not only drove our numbers to all-time highs, but also set the stage for CBOE’s future growth. Perhaps most significant was the Exchange’s conversion to a for-profit business model. There are many reasons behind CBOE’s decision to engage in this transformation, but ultimately, changing our business model will enable the Exchange to position itself most-effectively in a rapidly changing business environment. Streamlining the Exchange’s operations, creating new subsidiaries, such as the CBOE Stock Exchange (CBSX) and Market Data Express, and forming new alliances, exemplified by our collaboration with HedgeStreet, illustrate how CBOE has shifted the focus of its business to increasing and maximizing profitability. With the launch of CBSX, CBOE now offers options, futures and stocks — all on a single electronic trading platform. As the regulatory and competitive landscape continues to shift, the Exchange is extremely well positioned for the future as one of a select few exchanges to offer a multi-asset trading platform. Going forward, we expect that the Exchange’s members and customers will be able to realize economies of scale as they manage their cross-asset trading through a single, unified platform at CBOE. Our...