April 26th marks the 40th anniversary of the Chicago Board Options Exchange. While that makes it a mere youngster among Chicago exchanges, it is the pioneer that kicked off the equity options exchange industry in the United States in 1973 that is now global.
CBOE is also celebrating a few other notable birthdays this year as well – 30 years for the S&P 500 and S&P 100 or OEX, and 20 years of the CBOE Volatility Index, or VIX, which became a tradable futures product in 2004. Pretty nice round numbers for an exchange that ended 1973 with about 1.1 MILLION contracts traded and concluded last year with 1.1 BILLION.
With these key dates all coming together, John Lothian Productions, our budding commercial video division of John J. Lothian & Co, was hired by CBOE to tell the exchange’s story. So we embarked on a six-month video project, documenting the exchange’s creation, launch and growth from interviews with 10 executives and traders who spanned more than four decades at the exchange. We looked through hundreds of pictures the CBOE archives, video footage and charts. The video, titled CBOE 40, lets them tell the story of how the exchange went from an idea to the largest options market in the world.
We gave the video the look and feel of a commemorative magazine and designed the video to work in tandem with a traditional print layout. We took old photos of the first board of directors and through the magic our own Patrick Lothian’s video editing, turned them into 3D-esque images. And while those are cool visuals, the interviewees really tell the story, along with Jon Najarian (AKA Dr. J) as narrator.
We were fortunate to speak with some of the founders and executives who helped create the exchange under the Chicago Board of Trade’s stewardship. Joe Sullivan, the first president of the exchange and really the founder, flew from his home in Tennessee to Chicago to speak with us.
The soft-spoken Sullivan, who rightfully has the options industry’s highest award in his name, shared wonderful moments in the planning and early days of the exchange. There was his conversation with an SEC official in 1969 who told him that the agency had virtually no interest in approving an options exchange and said, “You shouldn’t waste a nickel on it.”
There was another battle for years over the SEC’s approval of put options in 1977, four years after CBOE’s launch with just 16 options on stocks, but only on calls. Sullivan said he pushed for puts because, “Calls without puts was like ham without eggs.”
There is Bill Brodsky, industry historian who is also known as the CBOE chairman and CEO, who steps down in May to the post of executive chairman. His candor about the challenges and frustrations alike was refreshing. He gritted his teeth talking about the five-year battle with the CBOT over CBOE exercise rights and the hoops he jumped through to bring the exchange public.
There were conversations with former vice chairman like Tom Bond, Mark Duffy, Bill Floersch and Gary Lahey who watched the exchange grow from the former smoking lounge at the CBOT to a double-decked trading floor above the historic CBOT trading room (now home to Peak 6) to its own building across the street. Each can tell story after story about how this got built or how important the Black-Scholes Model really is. Wayne Luthringshausen, chairman and CEO of OCC, told us how he and John Gelderman’s son Jeff built the CBOE’s first clearing system’s code, basically from scratch. And there is Dick DuFour of CBOE, who told us about the current CBOE building site – once owned by two competing railroads, and home of the old LaSalle Street Station where they filmed The Sting and screen legends like Clark Gable.
The leadership torch at CBOE will soon be passed to former John Lothian Newsletter guest editor Ed Tilly and Ed Provost (thus maintaining CBOE’s “Ed” lineage among C-level executives after Ed Joyce and Ed O’Connor). Those two men span an interesting historical timeframe at the CBOE as well. Ed Tilly started on the floor in 1985, rose to president and COO of the exchange and will take the CEO post. Ed Provost has been at the CBOE for 38 of its 40 years, and will become president of CBOE. This video started with a first draft of almost two hours, and now condenses 40 years into 26 minutes.
As a journalist in this space since 1996, I’ve had the opportunity to interview many executives who have set and changed the landscape in the futures industry in the US, Europe and abroad. Many of them share similar qualities of vision and determination, but also a focus and ability to see the next pitfall and opportunity. CBOE has had a rich history of those leaders with a lot to share and be proud of.
I invite you to watch the video we produced and hope you find the story as interesting as we did.