In early April, Ivan Brown assumed the role of NYSE head of options. The Options Industry Conference in May served as his unofficial, unheralded unveiling in the new position. He is an almost eight-year veteran of the exchange yet could still be called a millennial as a freshly minted 30-year-old.
Originally, Brown was with the listings group at NYSE in a strategy role before transitioning to the options side of the business after two years. In the ensuing period, Brown worked in competitive analysis, pricing and ultimately strategy before taking the helm two months ago as the successor to Steve Crutchfield, who left the exchange in March.
JLN spoke with Brown regarding the challenges he faces, getting the next generation engaged in the markets, and sports.
Editor’s note: The following interview has been edited for brevity and clarity.
Q: What is your background?
A: Prior to NYSE, I studied business at NYU focused principally on management, but also I’ve always had a love for corporate finance, generally. The strategy and drivers behind a business and understanding its heartbeat and how to properly ensure success have always been areas of focus for me. So, ultimately the path within the options group is a manifestation of that.
Q: Are you a New York native?
No, although I’ve always had a close connection to New York. I grew up in New England.
Q: So, are you a Pats fan?
A: No. My father-in-law is. I tend to be kind of neutral since I still have family in the New England area and being a New Yorker now — I just try to stay out of it.
Q: Well, it’s not that surprising you’re hedging your bets, right?
A: Yeah, well, I know there are passionate Patriot fans in the family, but that one I try to stay away from. Same thing with the Red Sox and the Yankees.
Q: What are the current challenges you face?
A: The challenges we face are not ones that are unique to the NYSE but apply broadly to the industry. I think about things like the fact that options, historically, have enjoyed a fairly robust growth rate and that over the course of the last couple of years that growth rate has somewhat plateaued. We’ve had occasional dips in volume at the industry level.
The [market making] universe is somewhat finite. We get concerned about things that fragment that universe, whether that’s additional exchanges or proliferation of strikes. I think we embrace competition and think that it’s a very healthy thing to the extent that it encourages innovation in the marketplace and users can derive utility from those innovations. But you kind of get into a situation where many of the offerings have largely been undifferentiated. So, you look at that and say, “Okay, where is the intersection between benefit and cost to the industry?”
Obviously, there are finite levels of [market making] capital and you extend that over a broader number of markets and a broader number of strikes, that can have some concerning impacts on spread width and such. At the end of the day, we’re a quote driven market and our quote is our advertisement. To the extent that those quotes become wider, that’s an area of concern for us.
Kind of related to that, you see a migration of volumes from a preference-based model towards an auction-based response model. And that’s something that’s worthy of further examination as well. Those are some of the things we see as headwinds.
Q: Speaking of volumes in stagnation mode, what do you see as the opportunities for growth?
A: At a general level, that comes from continued education. That is something that is exchange agnostic. That’s something we all benefit from in terms of engaging new and existing users. I think that, specifically, something we did recently was the launching of the ByRDs product, which is binary return derivatives security. Effectively it’s a binary option which provides a defined payoff and limited risk profile. We think it’s a very easy, relatable way for individuals who haven’t historically participated in the options markets to potentially engage in the options markets provided they have the appropriate education around the product … So, we’re trying to think of thoughtful ways of either engaging new participants or re-engaging existing participants by solving an unmet need.
Q: How do you think we’re going to continuing engage that next generation?
A: It’s a couple of things. Education with financial markets and products generally is always going to be paramount. But it’s how that education is delivered … All of us are increasingly dealing in a mobile world. So, the extent that we can deliver education through mobile applications is definitely a paramount focus; whether that’s using Facebook videos for tutorials or that kind of engagement … That’s also making sure the mobile experience in terms of investing and trading is increasingly robust and I know that has been an area of focus for a number of retail firms. Look at the advent and popularity of robo advising — I think that’s largely an opportunity since you have more and more people engaged in the market place.
I think it’s more about selling the outcome versus the component. For example, it’s better to contextualize the opportunity in the markets via strategy based upon what it does for you, versus how it’s constructed. Right now I feel like a lot of the conversations are, “Hey have you considered writing covered calls on your Apple position?” “Well, what’s a covered call?” “Okay, well, this is how you do it.” Versus, “Hey, have you considered ways to further monetize or enhance the income stream of your portfolio? One way is through writing a covered call.”
Thinking of the outcome as a package just versus the component is probably an interesting way of engaging younger people. I think they’re more interested in the end result, and then the strategy to achieve it is the secondary part. The value proposition is what the end result does for you.
Q: You mentioned you always had this interest in the markets and corporate finance — what charged that?
A: Everyone in my family has always owned their own business. So very early on — 3 or 4 years old — I was sitting in the office seeing what was going on, watching people have meetings and that sort of stuff, so I’ve always been interested in business. Over time, family involvement in investing and that sort of thing parlayed [into] an interest to the markets generally. When I went to school it was through a business lens, thinking about things like, ”What would it be like to be an entrepreneur and own your business?” But being in New York, surrounded by that financial environment, you have that natural curiosity piqued up as to how the financial markets work. That’s really where that developed over time.
Q: What do you do when you’re not at work?
A: That’s always the more interesting question. My wife and I both really love working out and being physically active. We’re really big cyclists. In New York, certainly the indoor cycling is something we love to do, but we also have road bikes and so we’re often doing rides around the New York area. Love cycling. Love to ski in the winter — it’s a big passion of mine.
I’m a musician — everybody in my family is a musician. I play the saxophone with an emphasis on jazz, although I don’t get to do that as often as I like. Occasionally, when I’m not reading a rule filing, I like to read, principally historical biographies. Right now I’m reading David McCullough’s biography of John Adams.
Q: What do you think about looking forward regarding options at NYSE?
A: I think the options business has been, is and continues to be an important component of the NYSE’s transactions services. So, at a broad level we’re always looking for ways of ensuring our competitiveness and maintaining a premium position in the marketplace. That’s being thoughtful about our technology offering and constantly innovating. The pace of technological innovation, whether in or outside of the financial community, is obviously robust — always looking to evaluate that.
On the technology angle, at the parent level, we’re making an investment in a state-of-the-art trading technology. We’re building a trading system from the ground up in the form of Pillar, with the focus on continuing to enhance our consistency, performance and resiliency … We recently transitioned our Arca equity platform over to that and it’s something that we’re looking to do across all our platforms.