The WFE 2020 Series: Ed Tilly, Chairman, President & Chief Executive Officer, Cboe Global Markets
1. As we kick off the year 2020, please can you look further into the future, and share your predictions on what the US market infrastructure industry might look and feel like by 2025?
The regulatory environment remains fluid. As it evolves, any new regulation could impact exchanges, and more broadly, how our capital markets operate. It is paramount that future regulation be designed to promote -- and not stifle -- fair, orderly and efficient markets. We’re apprehensive of a regulatory regime lacking a holistic view of the markets, narrowly focusing on exchange-related issues. Despite being one of the most transparent components of our capital markets, exchange businesses are scrutinized now more than ever. Regulation that is short-sighted and ill-conceived may not only be harmful to the markets overall, but to investors large and small.
Looking to what’s ahead, policies and regulations that promote capital efficiency for market participants will be critical to maintaining the long term health of our markets. Cboe is actively engaged with regulators and policymakers in the U.S. and Europe as we advocate for solutions that address our customer’s needs and protect the vitality of our markets. Robust liquidity and high market quality are of paramount importance to an exchange and market constituents.
In that vein, we took the bold step of challenging the SEC’s Transaction Fee Pilot, which we believe is a dangerous experiment offering a solution to a nonexistent problem and we continued to share our perspective on a host of other issues, including the U.S. financial transaction taxes that are shouldered by investors.
Lastly, we believe technology will continue to become less expensive, better, faster and as a result, enable change that shapes the future of our industry. Technology is the foundation for market participants to access exchange products, services and platforms. At Cboe, we are focused on providing leading-edge technology and information solutions that enhance our customers’ trading experience.
2. And how is your firm getting ready for the changes you’ve outlined above?
Cboe continues to be at the forefront of exchange advocacy with initiatives that promote fair, efficient and transparent markets. And our goal for 2020 and beyond is to be more outspoken on our views.
We’re building on the momentum from last year, where Cboe led the options industry effort for the adoption of SA-CCR, a proposal aimed at correcting bank regulatory capital rules that may be inadvertently dampening liquidity in the options market. Ultimately, this could lead to increased liquidity from a broader group of participants, facilitating liquidity diversification that would be beneficial for the entire ecosystem. Alongside a healthy options market, the utility of all derivatives products is likely to continue growing.
Elsewhere, we’re promoting capital efficiencies through improved risk modeling and increasing margin efficiency by holistically looking at the combined risk of a portfolio across different product types. We’re spearheading efforts to allow futures-style products to be held in a securities account and facilitating compression forums that would enable market participants to free up needed capital to better manage risk.
On the technology front, with our multi-exchange technology migration completed, our team is now focused on the development of a state-of-the-art research and data platform, which is expected to yield actionable trading insights for our customers across business lines.
3. Entering a new decade is not just about looking ahead; it’s also a good time for reflecting on the past. What’s the top lesson you’ve personally learned from the past ten years?
The transformation Cboe has undergone over the last decade is unlike any period in our history – starting with our demutualisation and IPO in 2010, to Cboe and Bats joining forces in 2017. Both changes emphasized to me the importance of company culture. The combination of Cboe and Bats, for instance, transformed our company into a global exchange operator. We now offer trading in nearly every major asset class and have extended our footprint into markets around the world. It also brought together two leading exchange groups with different cultures. The end result has been exciting – infusing the best of both to create Cboe Global Markets.
Our mission at Cboe is to define the markets of today and tomorrow. For our team, this is not only a mission, but is the spirit that embodies our team members every day as we work to better serve customers and the broader marketplace. It has fostered a culture where every team member comes to work each day knowing their work may be a part of the next great Cboe innovation.
As we look ahead to our next decade of growth, it’s often said a business is nothing without its people. At Cboe, we’re fortunate to have the right people in the right roles with the appropriate resources and systems in place to carry us forward.