CBOE Annual Report 2001

RESOURCES

As the first, oldest and largest options exchange in the world, CBOE drew on its extensive experience to develop sophisticated resources that facilitate speed, deep liquidity and efficiency in the trading process.

ACCOUNTABILITY, DPM ASSOCIATION
To offer immediate access to a floor contact and to provide a single point of accountability for customers, CBOE members voted in 1999 to expand the "DPM system" to all equity options. CBOE first introduced the DPM (Designated Primary Market Maker) program in 1987. Since then, CBOE market makers and DPMs have enabled the Exchange to grow amidst heightened competition. The DPM Association of Chicago was formed in April of 2000. It is an independent association composed of many of CBOE's DPMs. The DPM Association streamlines communication by providing a single point of contact for the investing community with the majority of Chicago's DPMs. Offering a vast depth of options trading expertise, the DPM Association is committed to market liquidity, best execution and market quality.

EXPANDED TECHNOLOGIES/span>
CBOE has one of the most technologically-advanced trading floors in the world. During FY 2001, CBOE increased flexibility and further expanded access to many of the existing automated systems. CBOE continued its technology leadership with a number of innovations. Advances like automated book priority, options quotes with size and improvements to RAES (Retail Automatic Execution System) provided CBOE's customers with the full service they expect from a trading floor combined with the speed and efficiency of an electronic marketplace.

CBOE provides efficient mechanisms to facilitate seamless trading. Eighty-eight percent of all executions are routed and conducted electronically.

HYBRID TRADING FLOOR
CBOE combines the advantages of cutting-edge technology with the benefits of open outcry to produce an efficient, reliable and rapid trading process resulting in maximized customer service.

BEST EXECUTION
As part of its ongoing commitment to enhancing execution quality, on August 1, 2000, CBOE introduced the Best Execution Assurance Program.^SM The program utilizes technological applications to provide member firms and other customers with best execution documentation. By providing direct price protection and the means with which to evaluate the quality of order executions at CBOE, the program provides member firms with the tools necessary to satisfy their best execution obligations when deciding to route order flow to CBOE.

VXN
CBOE developed the first Nasdaq Volatility Index, VXN,^SM as it became apparent that there was a dramatic divergence between volatility in the Nasdaq market and the broader market early in 1999. This significant resource, introduced on January 23, 2001, was constructed in response to customer demand for a quantified measure of volatility in today's tech-heavy marketplace. VXN tracks the volatility of Nasdaq-100 Index^® options (NDX), which trade exclusively at CBOE.

VXN VIX Chart

A COMMITMENT TO STAYING NUMBER ONE

In the years ahead, CBOE will continue to face many challenges, many anticipated and some surprises. At CBOE we view being the industry leader as a business decision. As the marketplace evolves, we remain committed to preserving our position as the number one options exchange in the world through our ongoing dedication to service a rapidly-changing marketplace.

We pledge to continue to develop the resources and products to help both our members and their customers prosper. From the number one options marketplace in existence, you can expect no less.



William J. Brodsky Chairman and CEO	Mark F. Duffy Vice Chairman	Edward J. Joyce President and COO

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