At Chicago’s equity options market, ‘open outcry’ cranks up the volume

A mainstay of Chicago business proved Monday that while technology has transformed the way it works, some things haven’t changed.

There’s still a trading floor at Cboe Global Markets, what used to be called the Chicago Board Options Exchange. Its business of listing options on stocks and equity indexes migrated to online networks years ago, but Cboe has found a need remains for the born-in-Chicago style of deal-making known as “open outcry.”

Cboe opened a new trading floor Monday in a spot important to its history. The 40,000-square-foot floor in the Chicago Board of Trade Building, 141 W. Jackson Blvd., is in space Cboe occupied from 1975 to 1983. The new floor replaces one Cboe had at 400 S. LaSalle St.

Traders still show up in gaudy jackets, the better to be seen by others. There are still trading “pits,” 10 of them on the new floor, but they are laid out more like clusters, with stadium-style levels to improve sightlines. Everyone has computer screens in front of them. A quick glance tells them all they need to know about the market. They can trade electronically, yell their orders or, when times get busy, use the hand signals of the old days.

“This is truly hybrid trading,” said Ed Tilly, Cboe chairman. “It brings together the best of both worlds.” Citing a continued demand for trading-floor access, Tilly said, “This investment is driven entirely by our customers,” who want liquidity, or ease of access to the markets.

Traders said routing orders through the floor comes in handy when investment firms need to engage in complex strategies or move a large number of contracts, especially when markets are volatile. It’s still possible to gauge the volatility by the noise level in the pits.

Ashlee Rezin/Sun-Times

But since there is less need for massive electronic tote boards, traders having the data they need in front of them, the new floor can let in some daylight. One wall has windows with a commanding view up LaSalle Street.

“It’s just great to see everybody back together, with the ability to stand side by side. It helps when you’re trying to do business,” said Matthew Filpovich, with Lakeshore Securities, a trader since 1977. On the previous trading floor, the layout had to be changed to keep participants at least six feet apart because of the pandemic.

With health concerns abating, Cboe felt the time was right to move to a smaller space with a more efficient design. Much of the layout is devoted to options trading in two popular products, the Standard & Poor’s 500 index and the VIX, Cboe’s index for market volatility. Other sections are devoted to options on the Russell 2000 Index and the SPDR S&P 500 ETF Trust.

“This space is just more modern. It’s got all the technology you need,” said Clayton Boland of Susquehanna Securities. He said it will help brokerage firms recruit staff.

Stocks opened Monday on an upswing, which may have contributed to the overall cheery mood.

The floor accommodates about 400 traders, far fewer than in the heyday of pit trading. But the side-by-side use of electronic markets and in-person trading allows for more business to be conducted, traders said.

Tilly said about a third of Cboe’s trading volume in the S&P 500 contracts are executed on the trading floor. With the VIX options, open outcry has about a 40% market share, he said.

The activity stands in contrast to CME Group, the Chicago-based futures market that maintains a trading pit only for certain options contracts related to interest rates. CME’s trading floor also is at 141 W. Jackson Blvd. Its former, massive trading floor next door at 333 S. LaSalle St. has been sold for conversion to a ComEd substation..

Looking over the new Cboe floor, Ryan Dau of Chicago Trading Co., said, “I am as bullish on pit trading as I’ve been in a long time. The fact that, one, we survived the pandemic and, two, that they built this new facility, I think it shows how important it is for customers to get liquidity in times of crisis.”

Ashlee Rezin/Sun-Times