The lessons and challenges of 2020: Cboe

By: Ed Tilly, Chairman, President and Chief Executive Officer, Cboe Global Markets Dec 2020

What changed in your business and what stayed the same this year? What was the impact of the pandemic and/or the economic slowdown?

The social and economic impact of the pandemic is clear. As an exchange operator, one of the ways Cboe can contribute to the recovery is to continue meeting our commitments and promising stability. Throughout this crisis, exchanges have demonstrated remarkable resiliency amidst extreme turbulence, providing a forum for investors to express their views and manage and lay off risk. That resilience is rooted in a recognition that financial markets are critical infrastructure for the economy, and it is our responsibility to be prepared by testing our systems regularly, running backup facilities and maintaining our robust business continuity plans. At our core, Cboe has not changed. We doubled down on our mission of defining markets by putting our people first and working together with our customers, regulators and the broader industry to find solutions.

What has the pandemic taught you that you didn’t know pre-Covid 19? What’s the most lasting change that 2020 has brought?

I view 2020 not as a year of change but as a year of acceleration and affirmation. One trend that has grown in 2020 is the prevalence of retail trading. Increased retail participation is fuelling record trading in multi-list options, and retail traders now comprise a sizable share of all stock market participants. The growing power of the next-gen retail investor is undeniable, and Cboe is well positioned to serve that growing customer base through product innovation, product awareness and best-in-class investor education. Our mini options on the S&P 500, along with mini-VIX futures have proven very popular and we are planning for other smaller contracts in our proprietary suite of products in 2021. And, as education is key to the success of new products, we have ramped up our educational materials to help new traders learn about the markets and various products before they begin trading. I expect the growth of retail trading to continue to be a major trend next year.

The pandemic has also shown us the strength of the exchange-regulator relationship. During the market volatility in March, the responsiveness and flexibility of US regulators was remarkable. They worked in lockstep with the exchanges to ensure markets were open and functioning well at a time of critical need for investors. The transparency was essential not only in enabling the exchanges to implement quick changes, but also in delivering relief that was important to the efficient functioning of our capital markets. It is my hope that this collaborative spirit will carry forward as an example of how exchanges and regulators can work together in the way we approach market structure issues. We must focus on what’s most important: serving the needs of all investors – small and large.  

What was your most important project this year (regulatory or otherwise) and did it change due to Covid-19?

In an ever-changing world, agility has become even more critical. We are making sure that we are flexible in everything that we do and have the ability to adapt and keep up with the changing needs of investors. Cboe made several strategic acquisitions this year, delivering on ambitious deal timelines despite the inherent challenges of working remotely. We seek out businesses that complement our core, helping us touch the customer earlier in the trade process or provide enhanced data post trade. We also look for opportunities to gain scale, expand our asset classes and extend our global reach. Cboe is redefining what a market operator does through our best-in-class technology and services. We acquired three data analytics firms to bolster our information solutions offering while expanding our North American equities business and setting the stage for the launch of European derivatives next year. I feel we are well-positioned for success in 2021.

What was the biggest challenge for the leadership team? 

Leading in the face of turmoil and unknowns. Cboe leadership had to make many difficult decisions in a short amount of time amidst an evolving situation. Putting our people first, we did our absolute best to make the right choices at the right moments. The most difficult decision of 2020 was to temporarily close our open outcry trading floor in Chicago in March. We took measures in lockstep with governmental agencies and health consultants to prevent the potential spread of Covid-19 by transitioning our hybrid trading floor to an electronic-only mode until it reopened in June. Today, the Cboe Options Exchange trading floor accommodates open outcry trading activity with a modified floor layout to accommodate social distancing and stringent health and safety protocols in place. As a global exchange operator, Cboe is deeply committed to the orderly operation and surveillance of our markets to help ensure investors are able to execute their trading activities when they need to most – but the health and safety of our people always comes first. The wellbeing of our associates and trading floor community continues to guide our decision-making process.

What were your (personal) best and worst moments of 2020?

I was extremely proud of how the entire Cboe team transitioned to working remotely quickly in March and I continue to be impressed by our associates as they adapt to every challenging development. As a business, we haven’t missed a beat. This year, more than ever, I’ve learned the importance of communication. I’ve adapted how I interact with everyone, from holding monthly virtual town halls to weekly all-staff emails on our latest developments. Communication has been key to keeping our associates motivated and prepared.

In one of the lowest points of 2020, Cboe walked the road toward healing and racial justice with the commitment to becoming a better, more educated ally as we move forward. Like many of our exchange peers, we have re-examined our diversity and inclusion efforts and reinvigorated them for today’s world. This summer, we launched our Diversity Leadership Council, which is focused broadly on making Cboe a more diverse and inclusive organization. One of the group’s first achievements was rolling out unconscious bias training to all Cboe managers, a crucial first step to acknowledging the role we will all play in inclusivity. And we continue to actively support the Cboe Women’s Initiative and its mission to increase representation, strengthen voices and build a culture of opportunity and advancement for the women of Cboe. I’m extremely proud of these groups and look forward to seeing what they will accomplish in 2021.

What do you see as the key themes for 2021?

We’ll continue to see geopolitical issues play out in the markets, as countries around the world grapple with growing nationalism, trade tensions and the effects of climate change. The US political regime change and the economic aftermath of closures from the pandemic are key drivers for how we will move forward in 2021. With the promise of vaccines on the horizon, there will likely be a re-evaluation of norms, personal and professional, as we work to determine what that new normal may look like.

I believe the speed of change will continue to hasten. The worldwide adjustment to working from home has kicked technology solutions into fast forward. What would have taken years to develop, test and adopt – we’re doing in weeks and months. In our business, there will be new ways and vehicles to transfer risk, and more enhanced ways to source liquidity – and Cboe will be defining them. The needs of the customer don’t change, but the way we engage with them and the way we interact will become more advanced and efficient. I am confident Cboe, like our exchange peers, will continue to drive the global marketplace forward with innovative technology solutions.