A Chicago financial powerhouse turns 50

A true Chicago invention celebrates its 50th birthday Wednesday.

Cboe Global Markets began life on April 26, 1973, as a venture into the financial unknown. Its founders were intrigued by the idea of dealing options on stock ownership, a concept Wall Street didn’t know how to approach. But Chicago could grasp it.

Dealing in the future value of something was the foundation of the grain markets at the Chicago Board of Trade. So some of its members paid $10,000 each for a seat on a new stock options market, the Chicago Board Options Exchange. The first trading took place in the Board of Trade’s old smoking lounge.

That first day, 911 options contracts changed hands. Today, the average daily volume typically tops 14 million contracts.

Much has changed, with the market moving from an “open outcry” style of pit trading associated with Chicago to trading that exists on electronic servers, with strategies growing beyond the basic “calls” and “puts”— options to buy or sell a security.

Ed Tilly, Cboe chairman, said his exchange’s basic job is unchanged. “It’s listening, and we’re not done,” he said, “because investors are not done” looking for ways to take or hedge financial risks.

Tilly said he was in the fourth grade in 1973. “I was working on all the math skills I would need as a trader,” he said. Tilly became a floor clerk at Cboe in 1987, starting a career that would lead him to its chairmanship in 2017.

Wednesday, he will preside at ceremonies at the opening and closing of the day’s trading at the Cboe’s trading floor, which it opened last year in the Chicago Board of Trade Building, 141 W. Jackson Blvd. The floor was both a throwback move celebrating its open outcry roots and a downsizing from its former physical trading space at 400 S. La Salle St.

Tilly said interest in the trading floor has been strong, with more traders now wanting to be there since before the pandemic shut things down in 2020. Cboe’s corporate offices are now at the Old Post Office, 433 W. Van Buren St.

Cboe is entertaining offers for its old building on La Salle. Tilly declined to comment on discussions with developer Michael Reschke, who has said he wants to buy it to turn at least part of it into a data center.

Tilly said Cboe will celebrate its golden anniversary with events throughout the year, including the awarding of five $100,000 charitable contributions. The first one will go to the Alzheimer’s Association for its research and education involving dementia-related illnesses.

Cboe continues as the nation’s largest market for options trading, known especially as the exclusive market for options related to the Standard & Poor’s stock indexes. But the company has expanded into trading in sundry asset classes in North American, European and Asian Pacific markets, while creating its own products, such as the VIX index of stock market volatility.

“From pioneering options and volatility trading to introducing new technologies and market models, Cboe has transformed the way market participants transfer risk and build capital. Today, building trusted markets remains central to our mission even as we continue to significantly expand our business,” Tilly said.

Accordingly, Cboe has a new branding campaign, calling itself “The Exchange for the World Stage.”

Tilly said longtime exchange participants are expected to gather at the Ceres Cafe in the Board of Trade building to toast the anniversary and swap old stories. The restaurant, known for its strong drinks, always was the preferred stop for traders wanting celebration or consolation.

For all the changes in Chicago’s trading community, some things stay the same.

Ashlee Rezin/Sun-Times file