The Securities and Exchange Commission has approved a new electronic market developed by the Chicago Board Options Exchange, officials confirmed Monday.

The new exchange, known as C2, was slated to go live this year but was put on hold as regulators considered a raft of new rules for U.S. financial markets, and exchanges worked to implement expanded penny pricing of options contracts.

Meanwhile, the CBOE is weighing its own future, as the settlement of a long-running legal battle earlier this month opened the way for the largest U.S. options exchange by volume to convert to a shareholder-owned structure from its current ownership by members.

Such a conversion, known as demutualization, allows the CBOE to pursue a long-delayed initial public offering, seen happening by mid-2010.

Demutualization could also see bidders, such as derivatives exchange operators CME Group Inc. and IntercontinentalExchange Inc., seek to acquire the CBOE.

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