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; Chris Isaacson, Executive Vice President and COO|
|Products||Options on equities, equity indexes, ETFs|
Chicago-based Cboe is the third-largest U.S. stock-exchange operator after the NYSE and Nasdaq Inc., as measured by market share.
Cboe Global Markets, Inc., the parent company for Cboe, ranked as the world's fourth-largest derivatives exchange by contract volume in 2017, according to the annual Futures Industry Association's survey of the world's leading derivatives exchanges. Cboe Global Markets recorded its 10th straight year of volume over 1 billion contracts in 2017 with 1.8 billion contracts traded on its three exchanges, Cboe, C2 Options Exchange and Cboe Futures Exchange. 
As of July 2016, Cboe listed options on more than 3,900 equity and exchange traded products. It's sister exchange, C2 Options Exchange, offers a different pricing model as an all-electronic equity options exchange.
Trading at Cboe is handled by 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.
As part of the acquisition of Bats Global Markets, Cboe Global Markets began migrating trading in all of the company's markets onto a single platform powered by Bats' proprietary trading technology. The CBOE’s Futures Exchange (CFE) successfully migrated to the Bats technology in February of 2018, the first of Cboe's legacy exchanges to do so.  
- 1 Chicago Board Options Exchange History
- 2 Products
- 3 Cboe Executives
- 4 Technology
- 5 Cboe Educational Efforts
- 6 CBOE Annual Contract Volumes
- 7 Regulation
- 8 CBOE Annual Reports and Historical Statistical Data
- 9 Office Locations
- 10 Resources
- 11 Additional Resources
- 12 John Lothian News Interviews
- 13 References
Chicago Board Options Exchange History
In addition to the history snapshot below, Cboe created a video, along with John Lothian Productions to celebrate its 40th anniversary in 2013.
Birth of the first
In the late 1960s, the Chicago Board of Trade (CBOT) sought to diversify its business. Weather-induced volatility (or the lack thereof) in agricultural commodities led to boom or bust years for the exchange. Looking for more stable annual performance, executives thought of ways to augment their agricultural futures offerings, initially focusing on offering futures on single stocks. But, the Securities Exchange Commission (SEC) was adamant the CBOT not pursue futures on stocks.
In 1969, the idea was born to apply the principles of the CBOT's commodity futures markets to securities options, since there was already an over-the-counter market for stock options, albeit very small. Monthly OTC options volume at the time was in the ballpark of 9,000 contracts a month.
"Our dealings with the SEC were totally adversarial. At our first meeting with the SEC people around the beginning of 1969, the senior staff guy told us in no uncertain terms that there were absolutely insurmountable obstacles and that we shouldn't waste a nickel on it," said Joe Sullivan, the first president of the CBOE.
The original plan for securities options trading 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. The SEC objected to a futures exchange listing options, leading to the development of a separate exchange, the CBOE.
Once it was decided that options on stocks was the way forward, the process of research, regulatory approvals, personnel recruitment and product development began.
Up until the development and debut of the CBOE, securities options prices were usually obtained by word of mouth or from the newspapers. The put-call ratio was first developed by looking at volumes of ads for contracts in Barron’s.
Doors open, bigger doors follow
Four years after the conception of the idea on a napkin, the CBOE launched on April 26, 1973 in a space that used to be the CBOT’s smoking lounge. The first day’s volume was 911 contracts on 16 stocks. They were all calls as the trading of puts would not be approved for another four years.
Of the utmost importance was the effective operation of the CBOE’s clearing house, the Chicago Board Options Exchange Clearing Corporation, under the guidance of Wayne P. Luthringshausen. The first day was tense, as the clearing software, essentially created pro-bono, was untested and cobbled together. But, everything worked, and after the day's clearing was over, Luthringshausen delivered the good news to an anxious Sullivan at the CBOE’s launch party.
For the CBOE to open and eventually expand its standardized listings, the SEC required one clearing corporation for options. The Chicago Board Options Exchange Clearing Corporation would become the Options Clearing Corporation later in 1973, and the central clearing house for all options markets in 1975.
While clearing was crucial for the operations of the exchange, growth of the options industry would not have been possible if not for the simultaneous development of the Black-Scholes Model, first published in 1973. The Black-Scholes model was a mathematical formula for pricing an option's premium.
“In the very earliest days of CBOE, no one really knew what an option was worth. It was just merely supply and demand, but it wasn’t based on any mathematical calculation," said longtime CBOE executive Bill Brodsky.
“There is no question that without the Black-Scholes model, we wouldn’t be sitting here. It is clearly the most significant formula developed in economics, certainly in my lifetime, and maybe even farther [back],” said Gary Lahey, CBOE vice chairman from 1986-1987.
During early days of trading, volume averaged about 1,000 calls a day. In that start-up period, the CBOE’s employees skewed younger as its future as an exchange was uncertain. Even as its clout in the industry grew, that uncertainty forced the exchange to continue the youth trend. 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 — a far cry from its first home in the former CBOT smoking lounge.
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). The renaming marked the beginning of a long partnership with Standard & Poor's. 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)
Birth of a Rockstar
The most ubiquitous of all the CBOE products is the VIX, frequently called the "fear index" or "fear gauge." The VIX was first developed in 1993 by Vanderbilt University finance professor Robert Whaley.
The VIX measures expectations of market risk through the pricing of S&P 500 stock index options. At first, the VIX was simply a sentiment indicator that could not be traded. That changed in 2004, when the CBOE introduced futures on the VIX. VIX options were introduced the following year.  Now, an array of exchange traded products based on the VIX (or its kindred volatility measures) are available to traders.
Cboe's Options Exchanges
- Cboe Options Exchange
- Cboe C2 Options Exchange
- Cboe BZX Options Exchange (formerly Bats BZX Options Exchange)
- Cboe EDGX Options Exchange (formerly Bats EDGX Options Exchange)
Cboe Futures and Securities Exchanges
With multi-asset-class trading/investing an increasing part of the financial world, CBOE introduced affiliated exchanges:
CBOE Becomes a Publicly Traded Company
Options on Equities
As of July, 2016, Cboe listed more than 3,900 equity and ETF options.
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.
In 1993, CBOE unveiled the CBOE Volatility Index (VIX). CBOE and the options industry celebrated its 25th anniversary in 1998, followed by the CBOE ADV surpassing one million contracts for the first time in 2000.
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.
In February of 2019 Cboe began the rollout of options on 11 Select Sector Indices that make up a sub-index of the S&P 500 Index, further expanding Cboe’s suite of products tied to S&P Indices. The exchange said the new options should have particular utility for investors seeking an alternative to options on exchange-traded funds, including European customers seeking an alternative due to certain European regulations. The Select Sector options are cash settled with European-style exercise, similar to Cboe’s S&P 500 Index (SPX) options. The rollout began with options on the Materials Select Sector Index.
|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:
Cboe entered into an agreement in the summer of 2017 with Cameron and Tyler Winklevoss (aka "the Winklevoss twins") to use bitcoin market data generated by their virtual-currency exchange Gemini Trust, paving the way for Cboe to list derivatives on bitcoin on its Cboe Futures Exchange. Cboe launched the first bitcoin futures (symbol XBT) on December 10, 2017, trading a reported 4,127 contracts in their first day of trading, with nearly 20 trading firms participating. Cboe waived transaction fees on XBT throughout that month. 
The exchange announced in March 2019 that it would not add XBT futures contracts for trading that month, 14-months after it listed them. However, Cboe said its currently listed contracts would remain active. That means XBTM19, the exchange’s last registered contract, is set to expire in June 2019.
Cboe filed with the SEC in mid-December 2017 to list multiple bitcoin futures ETFs, including: the First Trust Bitcoin Strategy ETF, the First Trust Inverse Bitcoin Strategy ETF, the GraniteShares Bitcoin ETF, the GraniteShares Short Bitcoin ETF, the REX Bitcoin Strategy ETF and the REX Short Bitcoin Strategy ETF. 
On January 23, 2019, the United States Securities and Exchange Commission (SEC) announced that Cboe had withdrawn its proposal for a rule change that would have allowed it to list and trade shares of a bitcoin ETF - specifically, the VanEck SolidX Bitcoin Trust. Cboe said in an email statement that the plan was related to the effects of the U.S. government shutdown occurring at the time. Cboe also said that the company planned on refiling a similar proposal at a later date with the SEC.
On December 8, 2017, Cboe launched trading on the Cboe SEF, its new swap facility. The launch gave market participants the ability to trade non-deliverable FX forwards on emerging markets currencies for the first time on proprietary Cboe technology.
Edward T. Tilly, Chairman, President and CEO
Chris Isaacson, EVP and COO
Alan J. Dean, CFO and Treasurer
Gerald T. O’Connell, EVP/CIO
- Todd Furney, Chief Risk Officer
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.
Before 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.
- 2016 - Announcement of Vector as next trade engine.
On February 28, 2018, Cboe announced the successful migration of Cboe Futures Exchange to its Bats proprietary technology platform.
Cboe Educational Efforts
The Options Institute 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 Annual Contract Volumes
|Year||Total Annual Volume*||Percent Change|
Cboe trading volume since its inception in 1973 can be found here.
Cboe is regulated by the Securities and Exchange Commission (SEC).
In December 2014 CBOE announced they would cede their self-regulatory duties to the Financial Industry Regulatory Authority (FINRA) starting Jan. 1, 2015. 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 continue to oversee the Cboe Futures Exchange.
CBOE Annual Reports and Historical Statistical Data
- CBOE 2015 Annual Report
- CBOE 2014 Annual Report
- CBOE 2013 Annual Report
- 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
400 South LaSalle Street, Chicago, IL 60605
Cboe New York:
17 State Street, 31st Floor, New York, NY 10004
The Monument Building
11 Monument Street, 5th Floor, London EC3R 8AF UK
+44 20 7131 3458
Cboe Hong Kong:
Cboe Hong Kong Limited
66/F The Center, 99 Queen’s Road Central
+852 3965 3018
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.
John Lothian News Interviews
In this video from JLN’s Industry Leader Series, Cboe Global Markets Chairman, President and CEO Ed Tilly talks about why the Transaction Fee Pilot is a misguided effort in search of a problem, specifically raising the issue of why such a plan does not address the boom in dark pool trading. Tilly also addresses Cboe nearing the end of the Bats technology integration and gives an outlook for the exchange’s asset classes in 2019.
In Part 2 of this interview, Tilly talks about the CBOE extending the VIX trading hours to access trading from European traders and how he expects the VIX will someday be open the same hours as the CME’s Globex S&P 500 futures.
He also talked about the CBOE’s new VXST short-term VIX contract, which will offer traders a much more sensitive instrument to be able to trade short-term events.
He spoke about the meeting the industry had with the chairman of the SEC about problems that have plagued the markets in recent months.
Lastly, he spoke about the impact of the Camp Proposal, a piece of proposed legislation from Rep. Dave Camp (R-MI), a member of the House Committee on Ways & Means, that could have a big impact on the options business and its customers. Camp’s proposal includes several provisions that would change the tax treatment for strategies used in options trading. Some believe it could severely harm the listed options business in the United States.
- New ‘Speed Bump’ Planned for U.S. Stock Market. The Wall Street Journal.
- 2014 CBOE Market Statistics. CBOE.
- 2015 FIA Annual Volume Survey. MarketVoice.
- 2015 FIA Annual Volume Survey. MarketVoice.
- CBOE reaches for new heights with $3.4 billion deal for Bats Global Markets. Chicago Tribune.
- CBOE Holdings Agrees to Acquire Bats Global Markets to Strengthen CBOE Holdings' Global Position in Innovative Tradable Products and Services, and Achieve Meaningful Cost and Operational Efficiencies. CBOE.
- CFE Integration. Cboe Global Markets.
- CBOE Futures Exchange Migrates to Proprietary BATS Technology. Finance Magnates.
- 40 Years Later, CBOE Is Thriving. Barron's.
- Faculty: Robert E. Whaley. Vanderbilt University.
- CBOE Volatility Index Introduction. CBOE.
- 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 History. CBOE.
- 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 Holdings to List VIX "Weeklys" Futures And Options. CBOE via PR Newswire.
- Twitter’s New Followers — CBOE and Social Market Analytics Team Up for New Sentiment Index Based on Social Media Data. John Lothian News.
- CBOE Teams Up With Winklevoss Twins for Bitcoin Data. The Wall Street Journal.
- Cboe bitcoin futures post strong debut. Cboe.
- Cboe Bitcoin Futures (XBT) Close First Day of Trading; Post Volume of More Than 4,000 Contracts. Cboe.
- Why Bitcoin Market May Be Better Without Cboe Futures Contracts. NewsBTC.
- Futures Firm Cboe Filed for 6 Bitcoin ETFs This Week. Coindesk.
- bitcoin ETFs Are Likely to Follow Futures, Cboe President Says. Bloomberg News.
- Cboe’s Bitcoin ETF Application Pulled After Repeated SEC Delays. Bloomberg.
- SECURITIES AND EXCHANGE COMMISSION (Release No. 34-84988 ; File No. SR-CboeBZX-2018-040). SEC.
- Cboe Launches Non-Deliverable FX Forwards Trading on Cboe SEF. Cboe.
- Brodsky, CBOE Chairman Who Took Exchange Public, to Resign. Bloomberg.
- Press Release. cboe.com.
- CBOE Unveils New Front End. Traders Magazine.
- CBOE Holdings Completes Acquisition of Livevol Data, Analytics Platforms. CBOE.
- CBOE to pass regulatory duties to FINRA. Reuters.
- CBOE Media Hub. CBOE.
- Taking the Reins: CBOE’s Ed Tilly Makes The Transition to CEO. John Lothian News.
- Getting Shorter: CBOE’s Ed Tilly Introduces Short-term VIX and Industry Taxes. John Lothian News.