Cboe’s Tilly Outlines Exchange Growth Amid Market Disruption

Suzanne Cosgrove

Suzanne Cosgrove


In a webinar interview Thursday, Cboe Global Markets’ CEO Ed Tilly said the exchange is contemplating reopening the trading floor next month but will not pull the trigger until all the safety protocols have been signed off on. “We’re taking extra precautions before we reopen,” he said. 

He also emphasized the value of the trading floor for Cboe customers. 

The exchange temporarily pushed to all-electronic trading in the span of just two days in March, abruptly closing its Chicago trading floor in response to the coronavirus pandemic.

“It was such a short time frame — two days — with so much change,” Cboe Chief Executive Officer Ed Tilly recalled in the interview with Kevin McPartland, managing director at Greenwich Associates. 

The Cboe floor closed effective Monday, March 16, and exchange staff switched to remote operations. The Securities and Exchange Commission had announced March 14 that it would facilitate a Cboe rule filing to allow the change.

“Engagement with regulators … has never been more transparent” as in this time of the COVID-19 crisis, Tilly said. He added that the markets reacted “the way they should” to the crisis and processed information as quickly as they could. He endorsed the concept of circuit breakers, which “allow the market to breathe a little and then come back in.”

Asked about the future of the trading floor versus all-electronic trading, Tilly said “We’ve always maintained our customers get to choose. Period.” 

“There’s great utility in the trading floor,” and service from its brokers, he said. The S&P 500 Index options (SPX) have huge notional value and complicated trades. “The more risky the trade, the more value added from the brokers.”

Tilly said he was glad “we didn’t keep the market closed for multiple days,” at the start of the pandemic, as some had suggested. “At a high level, everything went well. Could we fine-tune it? Yes.”

The exchange is continuing to build its data and pre- and post-trade analytics offerings, aided by its recent purchase of Silexx, which gives customers another channel to access global data and analytics across equity, options and futures markets. It is also currently integrating its recent acquisitions of Hanweck and FT Options, Tilly said. 

“Our pre and post-trade analytics are good, but we were missing real-time or time-of-trade,” he said. The acquisition of FT Options and Hanweck was made to fix that.

The coronavirus pandemic has made trading volatile across markets. The benchmark Cboe Volatility Index, the VIX, set its all-time high close on March 16, hitting 82.69. That compares with a long-term VIX Index average of 19.1 through 2019.   

Tilly said the VIX may be a more invaluable tool now than it has ever been. “We treat VIX exposure as…reacting to unknown unknowns in the marketplace,” he said. And the current pandemic is an unknown unknown. Generally, the markets look past the immediate term to trade on future events, he said, but now we don’t know when the pandemic is going to end. “When you wake up in the morning, that makes you uncomfortable,” and that also makes the markets uncomfortable, he said. “When we can see through this pandemic, things will return to normal.” 

Tilly also emphasized the importance of VIX Futures for anticipating the market’s expected future volatility, saying, “for a little VIX, you get a lot of bang for your buck.”

Despite COVID-19 and stay-at-home orders, Tilly said Cboe’s theme continues to be “grow, grow, grow.” He cited Tuesday’s announcement that Cboe will acquire MATCHNow, the largest equities alternative trading system (ATS) in Canada, and its agreement announced in December 2019 that it would acquire EuroCCP, a pan-European clearing house.

Both proposed acquisitions would add to Cboe’s geographic footprint. MATCHNow is Cboe’s first step into the Canadian marketplace, and Tilly noted it accounts for about 7 percent of the equities volume traded in Canada.

As for EuroCCP, Tilly said while Cboe does not trade derivatives in Europe “at the moment” it is expected to clear the way for equity derivative trading and clearing in the region in the future.

(Additional reporting by Sarah Rudolph and Matt Raebel)


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