The Spread: Remembering Joe Sullivan

Matt Raebel

Matt Raebel



joseph, sullivan, CBOT, Cboe, options, trading, obituary,



This week on The Spread, a binary options fraudster is charged by the CFTC, the father of the VIX publishes a paper on leveraged ETPs, and we take a moment to remember the remarkable life of Joseph Sullivan.



Welcome to The Spread, I’m Matt Raebel. I don’t mean to add to the myriad bad news flooding the Internet this year, but I would be remiss if I didn’t acknowledge the recent loss of a pretty huge figure in the options trading world this week, especially to the folks at Cboe and the OCC…but first, two short stories from this week. The CFTC this week announced it had entered an order of default judgment against Peter Szatmari, a former resident of Hawaii, who will be required to spend millions on fines instead of a new Ferrari. In October 2019, Szatmari and a business partner, David Sechovicz, were charged in an enforcement action by the CFTC with sending millions of ads for a fraudulent binary options scheme that successfully scammed over 25 thousand people. Sechovicz was ordered to pay almost $3 million in 2019, according to a related ruling by the SEC a year ago, and Szatmari was ordered in the recent CFTC ruling to pay $13.8 million. I guess crime doesn’t pay — the legal fees make it just not worth it. The creator of the VIX volatility index believes that leveraged ETP issuers may be costing options traders. Robert Whaley, creator of the VIX, co-authored a paper published in late September with Angel Tengulov arguing that when levered and inverse ETP issuers reduce leverage ratios – as many have done in 2020 – it affects the value of options contracts on those ETPs. However, the authors note the contracts are typically not adjusted, resulting in windfall transfers of wealth from outstanding long to outstanding short option holders. The paper outlined a suggested solution for the OCC, though the OCC declined to comment. The biggest story from this week was  the news that Joseph Sullivan III, the former Wall Street Journal reporter turned founder of the CBOE, died in his hometown of Knoxville, Tennessee, at the age of 82. Sullivan joined the Chicago Board of Trade in 1968 and spent five years founding the CBOE, or Cboe as it is called now. Wayne Luthringshausen, the retired chief executive of the OCC, said in a Chicago Tribune article that Sullivan was a “bright, intellectual guy.” He also said Sullivan was tenacious throughout the process of founding the world’s first options exchange, which involved a tremendous amount of hard work, in particular in gaining the approval of the SEC. Cboe published a statement thanking him posthumously for his vision and drive in launching the exchange, and the OCC released a statement saying that his leadership not only created economic opportunity for many in Chicago and the U.S., but also helped Chicago “bolden its position as the financial derivatives capital of the world.” John Lothian has published two articles on JLN dot com celebrating the life of this extraordinary man, without whose efforts I probably wouldn’t have this job covering options. JLN extends our condolences to Joseph Sullivan’s family.That’s gonna do it for The Spread this week. Stay safe and Happy Trading.



Federal Court Orders Affiliate Marketer to Pay More Than $13.8 Million for Binary Options Fraud

U.S. Commodity Futures Trading Comm’n v. Szatmari

SEC Charges Internet Marketers with Swindling Main Street Investors Through Phony Infomercials

Father of VIX Warns Options Glitch Is Costing Investors Millions
Alex Longley and Katherine Greifeld – Bloomberg

Levered and inverse VIX ETP option contract adjustments: No harm, no foul?
Angel Tengulov  Robert E. Whaley – Vanderbilt University

Leveraged ETP popularity raises gambling risk, experts warn
Steve Johnson – FT

Joseph Sullivan, CBOE founder who ‘changed the face of American finance,’ dies at 82
Robert Channick – Chicago Tribune

OCC Marks the Passing of Cboe Founding President Joseph Sullivan III

Cboe Statement on Passing of Founding President Joseph Sullivan III

Joe Sullivan’s Influence and Success
John Lothian – JLN

Joe Sullivan’s Influence and Success, Part 2
John Lothian – JLN


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