Founded by the Chicago Board of Trade in 1973 and member-owned for several decades, the Chicago Board Options Exchange was the first exchange to list standardized, exchange-traded stock options, and began its first day of trading on April 26, 1973, in celebration of the 125th birthday of the Chicago Board of Trade.[3]
In 1969, the vice chairman of the Chicago Board of Trade, Edmund “Eddie” O’Connor, developed the idea for an options exchange.[4] At that time, options on stocks were traded in a New York-based,[5] over-the-counter market which required a direct link between the buyer and seller and complex terms of sale.[6] The options exchange that O'Connor imagined would use a central clearinghouse to facilitate trades and stand behind contracts.[6] The Chicago Board of Trade established a committee to evaluate the concept.[7]
The options market idea faced resistance from officials at the Securities and Exchange Commission.[8] The CBOT hired Joseph Sullivan to address regulator concerns and present the concept to the New York brokerage community.[6] In October 1971, the SEC relented and approved the effort.[9]
In February 1972, the Chicago Board Options Exchange was incorporated as an independent body with its own bylaws and governing board.[10] Joseph Sullivan became the president of the organization.[11] Trading commenced on the exchange on April 26, 1973,[12] and was conducted in the former CBOT smoking lounge.[13] During its first full month of operation, 34,599 contracts were traded. By 1976, the monthly volume of trades had increased to 1.5 million.[14]
Over the next decade CBOE continued to operate from its location within the CBOT building. In 1984, CBOE moved to its next headquarters across the street at 400 S. LaSalle Street.[15]
On January 19, 1993, the Chicago Board Options Exchange introduced the CBOE Volatility Index, commonly known as the VIX Index.[16] The index was developed by Robert E. Whaley, a Vanderbilt University finance professor,[17] and was intended to
measure the 30-day implied volatility of S&P 100 option prices.[16] In 2003, the underlying benchmark for the VIX was changed to the S&P 500.[18] The company launched tradeable products using VIX as the underlying index.[18] Cboe developed and launched a futures exchange, and in early 2004 the company began trading VIX futures, after a survey of Goldman Sachs salespeople showed interest in trading VIX futures.[18]
On March 11, 2010, CBOE filed paperwork to launch an initial public offering[19] and began trading on the NASDAQ stock exchange on June 15, 2010.[20] The company delisted from the NASDAQ and listed its shares on its own exchange in 2018.[21]
In October 2017, the company rebranded from CBOE Holdings to Cboe Global Markets.[22]
In September 2019, Cboe Global Markets announced it was relocating its headquarters to the Old Chicago Main Post Office and that a new trading floor would be constructed in the Chicago Board of Trade building, which was the space the exchange originally occupied in the 1970s and 1980s.[23] The new trading floor opened in June 2022.[24]
Mergers and acquisitions
In September 2011, CBOE Stock Exchange, which was owned by CBOE Holdings, entered into an agreement to acquire the National Stock Exchange.[25] The acquisition was completed on December 30, 2011, with both exchanges continuing to operate under separate names. The National Stock Exchange continued to be based in Jersey City.[26] The National Stock Exchange ceased trading operations on May 30, 2014.[27]
In August 2015, CBOE finalized its acquisition of the LiveVol platform, a market data services provider.[28]
In January 2016, CBOE announced it had purchased a majority stake in Vest Financial, an investment adviser specializing in options-centric products.[29]
In September 2016, CBOE announced that it was purchasing BATS Global Markets for approximately US$3.2 billion.[30] BATS was then the second-largest U.S. stock exchange by shares traded and was known for being technology focused.[31]Business Insider noted that by buying BATS, "CBOE is looking to extend its geographical reach and products while cutting costs."[32] The deal was completed in March 2017.[33] Over the next few years CBOE migrated its exchanges onto the BATS technology platform.[34]
In February 2020, Cboe completed its acquisition of two data analytics firms, Hanweck and FT Options.[35] That same year, CBOE acquired Trade Alert, a New York-based order flow analysis service provider.[36] Also in 2020, Cboe acquired EuroCCP, the Dutch clearing house. The company already owned 20% of the clearing house and purchased the remaining 80%.[37] In May 2020, the company announced it was expanding into Canada, via acquisition of the Canadian stock trading platform, MATCHNow, which operated an alternative trading system (ATS).[38] Cboe acquired another ATS operator, BIDS Trading, in October 2020.[39]
In June 2021, Cboe announced that it had completed its acquisition of Chi-X Asia Pacific. Through the acquisition, Cboe established a significant presence in the Asia Pacific region for the first time by gaining access to two of the world's largest securities markets in Japan and Australia.[40] In November 2021, Cboe announced it had agreed to acquire NEO, the Canadian stock exchange operator.[41]
The company operates in North America, Europe and Asia-Pacific, providing platforms for trading options, futures, equities, and foreign exchange.[43][44] It has stock exchanges in the US, Canada, the Netherlands and Australia.[45] Its Canadian operations, Cboe Canada, accounts for 15% of the trading in securities listed in Canada by volume.[46] In Australia, the company operates Cboe Australia, following Cboe's acquisition of Chi-X in Australia and Japan.[47] Its European operations, Cboe Europe, is based in London and Amsterdam.[48] By trading volume, Cboe's stock exchanges are the largest in Europe, second-largest in Canada and third largest in the US.[47]
In addition to its exchanges, Cboe operates clearing houses.[47] These include its European clearing house, Cboe Clear Europe.[49] The company also has a cryptocurrency exchange, Cboe Digital, for exchanging crypto currencies and derivatives. The platform, originally ErisX, was acquired by Cboe in 2021.[50]
The company is headquartered in Chicago, where it operates a trading floor for open outcry trading.[51]
Cboe has two main proprietary index options products, options on the VIX Index, an index that measures expectations for stock market volatility[52] and options on SPX, the Standard & Poor's 500 index.[43] The company also provides platforms for trading options on other indices, including the Russell 2000 Index.[51]
As of 2023[update], Fredric Tomczyk, a board member since 2019, is the company's CEO.[52]
^Sullivan, Joe (February 8, 2019). "The Advent of the Chicago Board Options Exchange"(PDF). SEC Historical Society. Retrieved January 15, 2024. To evaluate the options market concept the Board of Trade established a committee chaired initially by the man who would become its chairman in 1969, a charismatic floor trader named Bill Mallers.
^Hagerty, James R. (October 15, 2020). "Joseph Sullivan III Helped Create Chicago Options Exchange". The Wall Street Journal. Retrieved January 15, 2024. Officials at the Securities and Exchange Commission initially discouraged the plan. One likened options trading to gambling and advised, "Don't waste another nickel on it."
^Lambert, Emily (2010). "Options". The Futures: The Rise of the Speculator and the Origins of the World's Biggest Markets. Basic Books. ISBN0465018432. By 1971 Sullivan had a mountain of paperwork on his desk that seemed to grow two feet per year. [...] That year Nixon appointed an SEC chairman who called in Cohen and gave the project the green light. On Sullivan's birthday in October 1971, the president of the Board received a letter from Irving Pollack at the SEC. In heavy legalese, he said that they had the green light to launch a market in stock options.
^Finnerty, Joseph E. (1978). "The Chicago board options exchange and market efficiency". Journal of Financial and Quantitative Analysis. 13 (1): 29–38. Retrieved January 15, 2024. In May 1973, the first full month of trading on the CBOE, a total of 34,599 contracts were traded; during 1976, the monthly volume reached 1.5 million contracts on the CBOE and 800,000 contracts on the American Stock Exchange.
^ abOsterrieder, Joerg; Kucharczyk, Daniel; Rudolf, Silas; Wittwer, Daniel (2020). "Neural networks and arbitrage in the VIX". Journal of Financial and Quantitative Analysis. 2 (1): 97–115. Retrieved January 15, 2024. On January 19, 1993, the Chicago Board Options Exchange introduced the VIX. Developed by Robert Whaley, it was designed to measure the 30 days implied volatility of at-the-money (ATM) S&P 100 (OEX) option prices[.]
