Chicago Board Options Exchange
|Chicago Board Options Exchange|
|Founded||Apr. 26, 1973|
|Headquarters||400 S. LaSalle Street, Chicago, IL 60605|
|Key People||Edward T. Tilly, CEO; Edward L. Provost, President and COO|
|Products||Options on equities, equity indexes, ETFs (+futures and stock exchange)|
The Chicago Board Options Exchange (CBOE) was founded in April 1973 as the first U.S. options exchange offering standardized, listed options. It was the largest of the 12 U.S. options exchanges in total volume and market share at the end of 2013.
CBOE ranked as the world's seventh-largest derivatives exchange by contract volume in 2012, according to the annual Futures Industry Association's survey of the world's leading derivatives exchanges. 
As of January 2014, CBOE listed options on more than 3500 equity and exchange traded products and on 14 cash indexes.
CBOE Holdings recorded its sixth straight year of volume over one billion contracts in 2013 with 1.19 billion contracts traded.
Trading at CBOE is carried out by way of the exchange's Hybrid system -- powered by the CBOE Command trade engine -- which enables customers to choose whether to have their transactions handled electronically or through open outcry. About 95 percent of CBOE orders are traded electronically, which equates to between 50 and 60 percent of the exchange's total business. The remaining transactions, traded via open outcry, typically are large or complex institutional orders that use the skills of floor brokers to "work the order" to gain potential price improvement.
- 1 Chicago Board Options Exchange History
- 2 Products
- 3 Awards
- 4 CBOE Executives
- 5 Technology
- 6 CBOE Educational Efforts
- 7 CBOE Volume
- 8 Regulation
- 9 CBOE Annual Reports and Historical Statistical Data
- 10 Resources
- 11 Additional Resources
- 12 References
Chicago Board Options Exchange History
CBOE History Timeline 
In addition to the history snapshot below, CBOE created a video to celebrate its 40th anniversary in 2013, which can be accessed at http://www.cboeoptionshub.com/cboe40/#.Ugi9Btco69I
Launched on Apr. 26, 1973, the Chicago Board Options Exchange was created by the Chicago Board of Trade (CBOT), which was seeking new avenues to supplement revenues from flagging futures transactions. CBOT leaders began in the late 1960s attempting to find a market that would diversify its traditional agricultural futures product line. In 1969, the idea was born to apply the principles of the CBOT's commodity futures markets to securities options. Until then, securities options prices were usually obtained by word of mouth or from the newspapers. The original idea was written on the back of a napkin by then-CBOT vice chairman Ed O'Connor during a dinner with then-Chairman Bill Mallers and President Henry Hall Wilson. It took years of research, work, and finding backing from people who could overcome exchange and government opposition. 
During early days of trading, volume averaged about 1,000 calls a day, and puts were not introduced for another four years. A year after launch, CBOE trading volume had grown 40-fold, allowing the exchange to move onto its own larger trading floor directly above the CBOT trading floor. Then in 1984, CBOE moved to its current 10-story building at 400 South LaSalle in Chicago.
Product Additions. One of the most noteworthy milestones in CBOE's history was the launch of stock index options, which began in March 1983 with the exchange's first proprietary index, the CBOE-100 Index, later renamed the S&P 100 Index (OEX). Four months later, options trading on the S&P 500 Index (SPX) was launched.
Subsequent years saw creation of more new products and indexing tools, including:
- Long-term Equity AnticiPation Securities (LEAPS) (1990)
- FLEX options (1993)
- CBOE Volatility Index (VIX) (1993)
- Dow Jones Industrial Average Index (DJX) (1997)
- VXN Volatility Index (VXN) (2001)
- CBOE S&P 500 BuyWrite Index (BXM) (2002) - first major benchmark for options performance, stemming from a study by a Duke University professor
- Weeklys options (2005)
- CBOE S&P 500 PutWrite Index (PUT) (2007)
CBOE Futures and Securities Exchanges
With multi-asset-class trading/investing an increasing part of the financial world, CBOE introduced three new affiliated exchanges:
- CBOE Futures Exchange (CFE) (2004)
- CBOE Stock Exchange (CBSX) (2007)
- C2 Options Exchange (C2) (2010)
CBOE Becomes a Publicly Traded Company
Options on Equities
As of January 1, 2014, CBOE listed 14 cash index options for trading. As early as 1983, CBOE began to establish exclusive licensing agreements with Standard & Poor's to offer stock index options based on the S&P 500 (SPX) and S&P 100 (OEX), and later with Dow Jones on the Dow Jones Industrial Average. In addition, the CBOE has created proprietary indexes and index methodologies, e.g., the VIX and a long list of volatility products, for tracking market volatility and investor sentiment. The exchange has been recognized for its index product development and as the creator of volatility products.
In March of 2013, CBOE Holdings renewed their exclusive license agreement with S&P Dow Jones Indices to list the S&P 500 index options contract (SPX) until 2031, with non-exclusive listing rights through 2033.
On December 10, 2014 CBOE announced it had entered into a licensing agreement with MSCI Inc. to offer options trading on several MSCI indexes. Under the agreement, in the U.S., options on the MSCI indexes will be solely listed for trading on the CBOE. The six indexes included in the agreement are the MSCI EAFE Index, MSCI Emerging Markets Index, MSCI ACWI Index, MSCI USA Index, MSCI World Index and the MSCI ACWI ex-USA Index. The exchange plans to offer options trading in the first quarter of 2015, pending regulatory approval, on two of MSCI's best-known indexes: the MSCI EAFE Index and the MSCI Emerging Markets Index; it plans to list options on the four other MSCI Indexes later in 2015.
On February 26, 2015 CBOE announced it had entered into a licensing agreement with the London Stock Exchange Group (LSEG) to list options based on more than two dozen FTSE and Russell indices. Cash-settled options on the indices will be listed on the CBOE. CBOE and LSEG will also collaborate on new index options products and investor education globally.
|Benchmarks Calculated by CBOE|
|CBOE calculates a number of proprietary indexes, including the indexes in the list below. CBOE has won numerous innovation awards stemming from the development and application of many of these indexes:
Full Listing of CBOE index options
- 2012 and 2013 - "Exchange of the Year, North America," and "U.S. Options Exchange of the Year," Futures & Options World
- 2008 - U.S. Options Exchange of the Year, Futures & Options World
- 2007 & 2008 - Exchange Leader in Fund Innovation for "Most Proactive Exchange for ETF Derivatives—The Americas:" Third (and Fourth) Annual Global ETF Awards
- 2007 Leader in Benchmark Index Innovation for the CBOE S&P 500 PutWrite Index for Most Innovative Benchmark Index: 2007 Super Bowl of Indexing Conference
- 2007 Leader in Information technology - CIO 100 award: CIO Magazine for operational and strategic excellence in information technology (IT)
- 2006 Exchange of the Year Award, North America for excellence and innovation: Structured Products magazine.
- 2006 Leader in Exchange Performance Award for World's Best Derivatives Providers: Global Finance magazine
- 2006 Leader in Options Innovation, Options on the CBOE Volatility Index for Most Innovative Index Derivative Award: 2006 Super Bowl of Indexing Conference
- 2004 Leader in Benchmark Index Innovation for the CBOE S&P 500 BuyWrite Index for Most Innovative Benchmark Index: 2004 Super Bowl of Indexing Conference
- 2004 Leader in Futures Innovation for the CBOE Volatility Index Futures for Most Innovative Index Derivative Award: 2004 Super Bowl of Indexing Conference
- Award-winning Web site: Forbes "Best of the Web," every year since the award's inception in 2001
- Edward T. Tilly, Chief Executive Officer
- Edward L. Provost, President and Chief Operating Officer
- Alan J. Dean, EVP/CFO
- Joanne Moffic-Silver, EVP, General Counsel & Corporate Secretary
- Gerald T. O’Connell, EVP/CIO
- Philip M. Slocum, EVP, Special Advisor to the Chairman
- Former CBOE Chairman and CEO, William J. Brodsky, assumed the new position of Executive Chairman of the Board in May 2013 after stepping down from his post as CEO.
In 2003, CBOE introduced the CBOE Hybrid Trading System. The practical philosophy behind Hybrid was that customers should be allowed to choose whether their orders are represented in the face-to-face open outcry marketplace or submitted to the electronic environment. In the electronic environment, CBOE Hybrid also can provide price improvement opportunities through features like Automated Improvement Mechanism (AIM) and Complex Order Auction (COA).
CBOE Hybrid lets market makers submit real-time, streaming quotes reflecting their individualized trading interest. CBOE disseminates the best bid and offer from all market participants, resulting in tighter, deeper markets that can be accessed electronically by customers. According to the exchange, liquidity is enhanced by remote participants - Electronic Designated Primary Market Makers (e-DPMs) and Remote Market Makers (RMMs) - as these market participants are allowed to stream quotes and trade electronically from remote locations.
Prior to the advent of the Hybrid System, CBOE introduced other technological solutions, including:
- 1984 - Launch of Retail Automatic Execution System (RAES) to facilitate electronic order execution;
- 1989 - Introduction of EBook, the first electronic customer limit order book;
- 1993 - Market makers on the CBOE trading floor use electronic, hand-held terminals;
- 1999 - Introduction of ROS, the Rapid Opening System, to shorten the time taken for the opening rotation;
- 2001 - Launch of CBOEdirect; the exchange's screen-based trading system, initially used for extended hours trading;
- 2010 - CBOE introduces its new front end, Pulse. The technology is the first product to emerge from Signal Trading Systems, a joint venture between CBOE and FlexTrade Systems.
- 2012 - Launch of CBOE Command, CBOE's new-generation trading system, which powers CBOE, C2 Options Exchange, CBOE Futures Exchange, CBOE Stock Exchange and OneChicago.
CBOE Educational Efforts
The Options Institute, which in 2010 celebrated its 25th anniversary, is the educational arm of CBOE. The Options Institute debuted in 1985 to educate investors about options. Each year, hundreds of seminars are held in the U.S. and internationally, aimed at individual and institutional investors, market regulators and others. Curricula are produced and courses are taught by CBOE trading industry professionals.
With the advent of technology and on-demand education, the Options Institute has added a comprehensive listing of online curricula to its live seminar lineup. These educational efforts are sponsored both by CBOE and by options-related firms to give investors and institutions an increased appreciation for options strategies and how they can be used in various portfolios to manage risk/maximize profit.
CBOE also hosts CBOE TV, which features an extensive list of online programs and podcasts on daily market developments, options products and practical strategies.
CBOE trading volume since its inception in 1973 can be found at: http://www.cboe.com/AboutCBOE/MediaHub/volume.aspx
The following provides highlights from the last 5 years:
- 2013 Trading Volume Totals - CBOE Holdings reported that 2013 marked its second-best year in total trading volume and average daily volume (ADV). CBOE Holdings consolidated trading volume for options contracts on CBOE and C2 and futures contracts on CFE totaled nearly 1.19 billion contracts. ADV in 2013 was 4.71 million contracts, an increase of four percent from 2012. CBOE also reported record ADV of 1.48 million contracts for its cash index options in 2013, an increase of 22 percent from a year earlier, led by record volume in CBOE's SPX and VIX options. SPX ADV was 823,369 contracts, a 19-percent increase from 2012, and VIX options ADV was 567,460 contracts, a 29-percent increase.
- 2012 Trading Volume Totals - CBOE reported that 2012 consolidated trading volume for options contracts on Chicago Board Options Exchange and C2 Options Exchange and futures contracts on CBOE Futures Exchange totaled 1.13 billion contracts. Average daily volume (ADV) in 2012 was 4.54 million contracts, down six percent from 4.83 million contracts traded in 2011. 
- 2011 Trading Volume Totals - CBOE reported that 2011 trading volume exceeded one billion contracts for the fourth consecutive year, with 1.15 billion contracts traded versus 1.115 billion contracts in 2010. CBOE average daily volume (ADV) in 2011 was 4.6 million contracts, up three percent from 4.4 million contracts per day in 2010. "CBOE index options volume" totaled 320.1 million contracts versus 270.0 million in 2010. Cash index options ADV was 1.27 million contracts, up 19 percent from 2010 ADV of nearly 1.1 million contractss. CBOE equity options volume totaled 497.0 million contracts versus 571.3 million in 2010. ADV in 2011 was just under 2.0 million contracts, down 13 percent from ADV 2.3 million contracts in 2009. CBOE ETF options volume totaled 335.1 million contracts versus 274.2 million in 2010. ADV in 2011 was 1.3 million contracts, up 22 percent from ADV 1.1 million million contracts in 2010.
- 2010 Trading Volume Totals - CBOE reported that 2010 trading volume exceeded one billion contracts for the third year in a row, with 1.115 billion contracts versus 1.134 billion in 2009. ADV in 2010 was 4.4 million contracts, down two percent from the 2009 ADV of 4.5 million contracts. CBOE index options volume totaled 270.0 million contracts versus 222.8 million in 2009. ADV in 2010 was nearly 1.1 million contracts, up 21 percent from ADV 884,000 contracts in 2009. CBOE equity options volume totaled 571.3 million contracts versus 634.7 million in 2009. ADV in 2010 was 2.3 million contracts, down ten percent from ADV 2.5 million contracts in 2009. CBOE ETF options volume totaled 274.2 million contracts
- 2009 Trading Volume Totals - The Chicago Board Options Exchange (CBOE) reported that 2009 trading volume exceeded one billion contracts for the second consecutive year. More than 1.13 billion contracts changed hands in 2009, a five-percent decline from the record 1.19 billion contracts traded in 2008. Average daily volume (ADV) in 2009 was 4.5 million contracts, down five percent from 2008 ADV of 4.7 million contracts. Equity options trading at CBOE set an annual volume record in 2009 of 634.7 million contracts, up five percent over 2008 volume. December 2009 volume was a record for any December at CBOE. Trading volume totaled 91.9 million contracts (ADV of 4.2 million contracts) for the month, up 26 percent from December 2008.
CBOE, C2 and CBOE Stock Exchange (CBSX) are regulated by the Securities and Exchange Commission (SEC). CBOE Futures Exchange (CFE), the wholly owned futures subsidiary of CBOE, is regulated by the Commodity Futures Trading Commission (CFTC).
In December 2014 CBOE announced they would cede their self-regulatory duties to the Financial Industry Regulatory Authority (FINRA) starting Jan. 1, 2015. After that date, FINRA will be able to perform cross-market surveillance on about 60 percent of the U.S. options market. CBOE also hired FINRA to take over its regulatory duties for the Options Regulatory Surveillance Authority (ORSA), which the U.S. options exchanges established in 2006 to collaborate on insider trading surveillance and investigations. CBOE employees will continue to oversee the CBOE Futures Exchange.
CBOE Annual Reports and Historical Statistical Data
- CBOE 2012 Annual Report
- CBOE 2011 Annual Report
- CBOE 2010 Annual Report
- CBOE 2009 Annual Report
- CBOE 2008 Annual Report
- CBOE 2007 Annual Report
- CBOE 2006 Annual Report
- CBOE 2005 Annual Report
- CBOE 2004 Annual Report
- CBOE 2003 Annual Report
- CBOE 2002 Annual Report
- CBOE 2001 Annual Report
The CBOE Media Hub was designed to meet the informational needs of the working press. Much of the information is organized by topics on which CBOE offers expertise, including market volatility. CBOE "Quick Links" include all CBOE press releases, bios/photos of CBOE executives, exchange communications, historical trading volume, CBOE history, op-eds/articles, press kits and a link to CBOE-TV.
- 2012 Annual Volume Survey. FIA magazine.
- CBOE History. CBOE.
- CBOT Chairman Speaks at Business Leaders Program on Innovation. CBOT.
- CBOE goes public. Futures Magazine.
- "Symbols Guide for Equity Options”. www.cboe.com.
- Press Release. www.cboe.com.
- Press Release. www.cboe.com.
- What About the Valley after the Rally?. New York Times.
- CBOE Holdings And S&P Dow Jones Indices Extend Licensing Agreement Through 2033. press release.
- CBOE Enters into Agreement with MSCI Inc. to List Index Options. CBOE.
- CBOE Holdings Signs Licensing Agreement to List Options on FTSE and Russell Indices. CBOE.
- "CBOE's VIX Options Wins Award For Most Innovative Index Derivative Award”. CBOE.
- "CBOE S&P 500 BuyWrite Index (BXM) was awarded the Most Innovative Benchmark Index ”. CBOE.
- "CBOE Volatility Index (VIX) Futures product received the Most Innovative Index Derivative Award ”. CBOE.
- Press Release. cboe.com.
- CBOE Unveils New Front End. Traders Magazine.
- CBOE Holdings Reports 2012 Consolidated Trading Volume. CBOE Holdings.
- Press Release. CBOE.
- CBOE 2009 TRADING VOLUME EXCEEDS ONE BILLION CONTRACTS FOR SECOND STRAIGHT YEAR. CBOE.
- CBOE to pass regulatory duties to FINRA. Reuters.
- CBOE Media Hub. CBOE.