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Cboe’s Tilly Stresses Value of Open Outcry

The more things change, the more they stay the same at Cboe Global Markets.

And open outcry trading, long the exchange’s hallmark, is vital and will continue, according to Ed Tilly, chairman, President and Chief Executive Officer at Cboe Global Markets.

In a webinar today sponsored by Greenwich Associates, Tilly said the exchange was running very smoothly despite days of extreme volatility, closure of its iconic trading floor and absence of floor brokers and alterations to its business continuity plans. Any changes to the exchange have been more modification and alteration rather than wholesale innovation.

Edward Tilly, CBOE

Edward Tilly, Cboe Global Markets

“We’re providing the same valuable services now that we have been since our opening in 1973,” Tilly began. “We’ve had to adjust our business model to a work-from-home one but we’ve been busy and fully engaged with our clients and each other.”

One topic Tilly was asked about by facilitator Kevin McPartland was recent market volatility and ability of markets and traders to handle it, in reference to March 16 and a recent Wall Street Journal article that said the particular day almost crashed the equity marketplace. And while Tilly noted the March Monday was indeed unique it was not end of equity trading as he saw it.

“There’s no doubt that March 16 was a big day for us here at Cboe – moving the whole organization off the floor and home,” Tilly began. “But perhaps the biggest challenge for us was closing down our open outcry trading operations and access to the new all-electronic exchange model. It was an ‘all hands on deck’ moment, the entire staff was involved. At was it this time our engagement with the regulators was highest – and that relationship with them has never been more productive and helpful. The real trick was getting the customer base engaged in this new paradigm.”

Tilly noted that the Cboe has always had an open outcry trading floor and later an electronic component – which gave it a hybrid structure where customers could use one or the other element independently or in some combination. And that structure was intact up until the COVID-19 pandemic forced the open outcry element and floor to close. When outcry trading was closed, the exchange mobilized to get all on the electronic component.

“March 13th on a Friday we closed the floor and then just two days later we re-opened electronically,” Tilly recounted. “And then by the 18th we everyone home working remotely. That commitment then to getting things done then hasn’t changed now.”

It’s this head down and ‘get it done’ approach that Tilly is counting on to get his open outcry trading floor open and ready – hopefully for a June 1 re-open.

“As we’re contemplating our re-open, the process isn’t quite the same as the shutdown. “We’ve been aligning all the units back together for weeks,” Tilly explained. “We’ve been in communications with companies, setting up and conducting weekend testing and getting our organizational processes in line  to get everyone back safely. The health and safety of our workforce is paramount.”

Overall, as a part of the broader trading industry, Tilly said he and his competitors have locked arms and worked together to keep the markets running smoothly. And the death of the trading floor, as some pundits and others have contemplated, is not in his future playbook.

“As we evolved into the hybrid model we have now, the cry for closing the floor was loud. But we’ve  maintained our customers get to choose how to trade – whatever the service is – not us. We’ll answer the customers’ needs and now they say they want the outcry.”

Tilly agrees with other exchange executives that having a human element on a physical trading floor is a plus for the marketplace. Floor brokerages, he said, add “huge value” as there is no better service than someone acting on one’s behalf.

“When you can replicate that value with technology, then fine. But until then, open outcry is a great value-add,” Tilly said. “The more risky the trade, the more the need for a broker. We’ve observed this time and time again and can’t wait to re-offer this service to customers.”

On the topic of expansion and future growth, Tilly said the exchange is always on the lookout for future opportunities, citing its recent purchases of Euro CCP in Europe and the proposed MatchNow ATS in Canada this past week.

“Our mantra is grow, grow, grow,” Tilly said. “We are always on the lookout for a core business that will help us expand our asset class offerings, geography and meet client needs.”