| September 20, 2023 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | I had just landed in Charlotte, NC yesterday morning on my way to Bermuda and the WFE's General Annual meeting and I turned off airplane mode on my phone. The first text quickly flashed on my phone with the message, "Ed Tilly has resigned as CEO of Cboe in a scandal, do you want to comment for the newsletter?" No! I said.
I was shocked, saddened and hurt inside for my friend and industry colleague Ed Tilly. After reading the press release, the emotion that emerged was one of anger. Anger not at Ed Tilly for his all too common human moral failing, but for the Cboe board of directors for the harsh way they disposed of a man who gave 35 years to the Cboe and led it through many of its most important contemporary strategic and corporate changes. He deserved much better. Tilly had too much goodwill in the company and industry for the Cboe to send him to the trash heap with a message like that. The harshness was a mistake.
Much will be made of the Cboe's stock rallying 2.75% yesterday amid a down stock market, I believe signifying the exchange's transformation from a shark to bait.
What the Cboe board did yesterday in naming 68-year-old Fred Tomczyk as CEO is to undeniably declare it as an organization in transition, open to a transaction. Instead of naming someone from the deep Cboe bench to the role of CEO, signifying continuity for the Cboe's dynamic growth strategy, they said, wait, we think we need to go in a different direction. That different direction may be someone finally swooping in and buying the Cboe. Or it may just be organizational chaos as it finds a new direction, but in the meantime good people leave the company for one with greater clarity and better opportunities.
Despite the reasons given for the leadership change, the CEO displacement showed deep fissures in the Cboe board about the direction of the company. This message was about more than just naming a new CEO, setting the ethical record straight and moving on from Ed Tilly. I believe the underlying unstated harshness of the press release towards Tilly unfortunately reflected poorly on the new leadership. This press release did not seem to be crafted by the Cboe corporate communications or human resources department; instead it had board of directors conflicts with the CEO about more than relationship indiscretions written all over it.
The question for the Cboe is how fast they are going to get the new team in front of the world and the press to get their message out. David Howson, president, Cboe Global Markets, is scheduled to give a fireside chat at FIA's EXPO. But we need to hear from Tomczyk and Bill Farrow, the new Cboe non-executive chairman. The FIA EXPO would be a great venue for a Cboe press conference to introduce the new leaders. If there was one thing that Tilly was a master of, that was communication. His work at industry press conferences with his team was exceptional. His composure under fire from my best off-the-wall questions were always spot on. Because he was a friend, I hit him harder with questions. I never pulled any punches.
Ed Tilly was a great leader at the Cboe. He helped the exchange transition from open outcry to electronic trading, made the jump from member to staff and then to CEO. He saw the exchange's weaknesses and addressed them in a transformative deal with BATS, leading to a new, younger, more aggressive Cboe. He has led the company into strategic acquisitions in new exchanges, data and analytics and brought incredibly bright people onto the Cboe team. He has continued the Cboe tradition of civic leadership in Chicago and beyond, blazed by former CBOE Chairman and CEO William Brodsky. Cboe has become a truly global exchange group during his tenure.
If the market is right, Fred Tomczyk won't have to worry about fitting into Tilly's shoes for very long. Right now, the Cboe looks like bait for another player. Maybe another Chicago institution led by a former floor trader will finally leave the docks and go fishing.
During my stopover in Charlotte, I talked to Jennifer Hughes of the Financial Times, who asked to talk about the leadership change. She quoted me in the FT article saying this:
"It's a big deal. He was a really good leader for the company," said John Lothian, publisher of an industry newsletter and formerly a futures broker in Chicago. "Ed represented a continuation of the Cboe culture even as that changed when it bought Bats and it became much more aggressive and less of a member-led exchange."
~JJL
| | | | | | Lead Stories | | | Options Traders Seek Protection From Higher Rates Ahead of Fed Decision
Edward Bolingbroke - Bloomberg
Options traders are seeking protection from higher interest rates ahead of Wednesday's Federal Reserve policy decision.
That's a change from the norm over the past couple of weeks, during which traders broadly favored hedging for a pivot to rate cuts by mid-2024. The shift in momentum has a backdrop of erosion in the amount of easing priced in for next year and subscription to the idea that the Fed will raise rates once more this year in November or December and keep them elevated indefinitely.
/jlne.ws/46bqrIM
Cboe CEO Ed Tilly rose from the trading pit to exit the C-suite in scandal; Executive resigns after probe into undisclosed relationships; Move raises questions about firm's future after global growth
Katherine Doherty - Bloomberg
When Ed Tilly walked onto the Chicago Board Options Exchange floor in 1987 - where trading pits teemed with sweaty men barking orders and flashing signals - the recent college graduate was hooked. More than two decades later, he was running the place, overseeing a spate of deal-fueled expansion that ushered Cboe into the electronic age, transforming it from a small options exchange into a global powerhouse offering everything from the fear index, VIX, to zero-day options. By Saturday, it had all unraveled.
/jlne.ws/3rhETQz
An oral history of the fear index
Robin Wigglesworth - Financial Times
The Cboe Volatility Index â commonly known as Vix because of its ticker â turned 30-years-old earlier this year. But an arguably more important if less appreciated marker took place two decades ago today.
In January 1993, the Chicago Board Options Exchange first unveiled the gauge of expected stock market volatility as implied by options prices, based on a formula by professor Bob Whaley, which he developed over a six month vacation in France.
/jlne.ws/46lXJVh
'Volatility Is Dead' Debate Heats Up As S&P 500 Braces For The Worst 10 Days Of The Year
Markets Insider
The S&P 500 index has proven itself to be a seasoned sailor in 2023, gliding gracefully through market waters, steering clear of perilous tempests that could have thrown it off course.
For more than 100 trading sessions, the S&P 500, as tracked by the SPDR S&P 500 ETF Trust (NYSE:SPY) has displayed remarkable resilience, with daily fluctuations never exceeding a 1.5% drop.
/jlne.ws/3EILg2q
Japan's top currency diplomat says Tokyo in close contact with US on FX moves
Tetsushi Kajimoto - Reuters
Japanese authorities are always in close communication with U.S. counterparts on currencies and share a mutual understanding that excessive volatility is undesirable, Tokyo's top foreign exchange official said on Wednesday. Masato Kanda, vice minister of finance for international affairs, speaking to reporters at his office, was responding to the comments by U.S. Treasury Secretary Janet Yellen a day earlier.
/jlne.ws/46aBMJ6
Yellen, Kanda Put Spotlight on Yen (JPY USD) Intervention as Fed Looms
Erica Yokoyama and Yoshiaki Nohara - Bloomberg
Currency traders preparing for this week's policy decisions from the Federal Reserve and Bank of Japan got fresh reminders that Japanese officials stand ready to intervene in the currency market with possible US backing if swings in the yen are deemed excessive.
Japan's top currency official Masato Kanda said Wednesday he's keeping in close contact with his counterparts in the US on a day-to-day basis, and both sides agree that excessive currency moves are unwelcome.
/jlne.ws/46k05nL
Don't Be Surprised by Volatility in Treasuries Around Fed Move
Jack Denton - Barron's
Federal Reserve interest-rate actions and projections from officials at the central bank tend to move the market for U.S. Treasuries, and understandably so. But there is reason to believe volatility could be heightened around Wednesday's Fed decision.
The central bank is widely expected to hold borrowing costs steady this month, but there is more uncertainty aroundâand investor focus onâthe next move in November and the dot-plot projections of where officials at the Fed see rates in the coming years.
/jlne.ws/3LrpyU7
Bitcoin Price Rises Ahead of Fed Decision on Rates. Brace for Volatility.
Jack Denton - Barron's
Bitcoin and other cryptocurrencies rose Wednesday ahead of the Federal Reserve's latest move on monetary policy. With traders having piled into bullish bets ahead of the central bank's interest-rate decision, crypto markets could be primed for volatility.
The price of Bitcoin has advanced less than 1% over the past 24 hours to above $27,150, trading near its highest point so far in September. The largest digital asset has moved comfortably outside of the $26,000 zone that has dominated trading for the past month amid historically low levels of volatility and volumes.
/jlne.ws/3ZpJSuV
| | | | | | Exchanges | | | Cboe stock rises as CEO's sudden exit fuels CME merger speculation
Steve Daniels - Crain's Chicago Business
It's a rare sight when a well-regarded CEO resigns abruptly over a controversy and the stock rises on the news. But that's the case with the sudden resignation, announced today, of Cboe Global Markets Chairman and CEO Edward Tilly, who left after an internal probe that uncovered undisclosed "personal relationships with colleagues." The stock, which already had climbed more than 20% so far this year as trading volumes keep topping previous highs, rose 2.75% Tuesday, closing at $155.87 a share. Volume was about 2.8 times its daily average.
/jlne.ws/3EJ2hJI
Trading schedule on the Moscow Exchange during holidays 2024
The Moscow Exchange has determined the rules for the operation of markets during public holidays in 2024. Trading on the foreign exchange market and the precious metals market, the stock market, the deposit market and the loan market, on the derivatives market, on the market of standardized derivative financial instruments (SDFIs) will be held on official holidays on January 3-5 and 8, April 29 and 30 , 10 May and December 30, 2024.
/jlne.ws/3PM4QBe
| | | | | | Regulation & Enforcement | | | SEC cracks down on misleading fund names over industry objections
Stefania Palma and Brooke Masters - Financial Times
Three-quarters of US public investment funds will have to prove that the vast majority of their holdings match their names under a crackdown on deceptive marketing adopted by the Securities and Exchange Commission on Wednesday.
The commission voted 4-1 to require mutual and exchange traded funds that use terms such as "growth", "value" and "artificial intelligence" or tout their use of "environmental, social and governance" factors to have 80 per cent of their assets in line with their names.
/jlne.ws/3RqI0QD
| | | | | | Strategy | | | A New Wave of Stock Market Volatility Could Be Right Around the Corner. What to Do.
Steven M. Sears - Barron's
The world is on the verge of a volatility eruption. At least that's what Goldman Sachs is telling its clients.
Many investors already feel that they are making financial decisions amid heightened macro-risk factors that are concealed by the languid, range-bound nature of markets.
But looming geopolitical risks, the continuing efforts of central banks to reduce inflation without sparking economic recessions, and the threat of a U.S. government shutdown can be easy to dismiss until something volcanic occurs that removes all doubt.
/jlne.ws/46lyJ0s
| | | | | | Miscellaneous | | | The Ed Tilly scandal at the Cboe is bad news for Chicago
The Editorial Board - Chicago Tribune
Ed Tilly started as a trader at the Chicago Board Options Exchange in 1987 and worked his way up to chief executive officer. Under his decadelong stewardship, the exchange grew dramatically, and it was having a banner year until Tuesday, when Tilly's Chicago success story ended abruptly.
Knowledgeable, popular among trading professionals and one of the most recognizable faces of his industry, Tilly resigned under pressure after an internal investigation found he had undisclosed personal relationships with colleagues.
And just like that, Chicago lost one of the anchors keeping a bobbling industry in place.
/jlne.ws/3PyhB10
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