The Mistaken Harshness in Cboe Leadership Change Press Release Sends Wrong Message

John Lothian

John Lothian

Executive Chairman and CEO

I had just landed in Charlotte, NC yesterday morning on my way to Bermuda and the WFE’s General Annual meeting and I turned off airplane mode on my phone. The first text quickly flashed on my phone with the message, “Ed Tilly has resigned as CEO of Cboe in a scandal, do you want to comment for the newsletter?” No! I said. 

I was shocked, saddened and hurt inside for my friend and industry colleague Ed Tilly.  After reading the press release, the emotion that emerged was one of anger. Anger not at Ed Tilly for his all too common human moral failing, but for the Cboe board of directors for the harsh way they disposed of a man who gave 35 years to the Cboe and led it through many of its most important contemporary strategic and corporate changes. He deserved much better. Tilly had too much goodwill in the company and industry for the Cboe to send him to the trash heap with a message like that. The harshness was a mistake. 

Much will be made of the Cboe’s stock rallying 2.75% yesterday amid a down stock market, I believe signifying the exchange’s transformation from a shark to bait.

What the Cboe board did yesterday in naming 68-year-old Fred Tomczyk as CEO is to undeniably declare it as an organization in transition, open to a transaction. Instead of naming someone from the deep Cboe bench to the role of CEO, signifying continuity for the Cboe’s dynamic growth strategy, they said, wait, we think we need to go in a different direction. That different direction may be someone finally swooping in and buying the Cboe. Or it may just be organizational chaos as it finds a new direction, but in the meantime good people leave the company for one with greater clarity and better opportunities.  

Despite the reasons given for the leadership change, the CEO displacement showed deep fissures in the Cboe board about the direction of the company. This message was about more than just naming a new CEO, setting the ethical record straight and moving on from Ed Tilly. I believe the underlying unstated harshness of the press release towards Tilly unfortunately reflected poorly on the new leadership. This press release did not seem to be crafted by the Cboe corporate communications or human resources department; instead it had board of directors conflicts with the CEO about more than relationship indiscretions written all over it. 

The question for the Cboe is how fast they are going to get the new team in front of the world and the press to get their message out. David Howson, president, Cboe Global Markets, is scheduled to give a fireside chat at FIA’s EXPO. But we need to hear from Tomczyk and Bill Farrow, the new Cboe non-executive chairman. The FIA EXPO would be a great venue for a Cboe press conference to introduce the new leaders. If there was one thing that Tilly was a master of, that was communication. His work at industry press conferences with his team was exceptional. His composure under fire from my best off-the-wall questions were always spot on. Because he was a friend, I hit him harder with questions. I never pulled any punches. 

Ed Tilly was a great leader at the Cboe. He helped the exchange transition from open outcry to electronic trading, made the jump from member to staff and then to CEO. He saw the exchange’s weaknesses and addressed them in a transformative deal with BATS, leading to a new, younger, more aggressive Cboe. He has led the company into strategic acquisitions in new exchanges, data and analytics and brought incredibly bright people onto the Cboe team. He has continued the Cboe tradition of civic leadership in Chicago and beyond, blazed by former CBOE Chairman and CEO [[William Brodsky]]. Cboe has become a truly global exchange group during his tenure.

If the market is right, Fred Tomczyk won’t have to worry about fitting into Tilly’s shoes for very long. Right now, the Cboe looks like bait for another player. Maybe another Chicago institution led by a former floor trader will finally leave the docks and go fishing. 

During my stopover in Charlotte, I talked to Jennifer Hughes of the Financial Times, who asked to talk about the leadership change. She quoted me in the FT article saying this: 

“It’s a big deal. He was a really good leader for the company,” said John Lothian, publisher of an industry newsletter and formerly a futures broker in Chicago. “Ed represented a continuation of the Cboe culture even as that changed when it bought Bats and it became much more aggressive and less of a member-led exchange.”

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