As it proceeds with plans to demutualise in the New Year, Chicago Board Options Exchange (CBOE) chairman and CEO
Bill Brodsky spoke to Elliott Aykroyd about the changing business model of US exchanges and the successes and challenges for his exchange in a thriving options industry
People say consolidation amongst US options
exchanges is inevitable, but there are still six of them. What
do you think about that and what might CBOE's role
On the first part, consolidation normally occurs when
business is not good, but [options] business is very good so
people are able to maintain each of the entities on a
stand-alone basis. Though of course what you're seeing now is
New York Stock Exchange [NYSE] getting back into the options
business after an eight year absence via the merger with
Archipelago and Pacific Exchange, which is an interesting
development. If you look at the history of the options business
in the US, there have been others who have existed in the past
who have now gone: NYSE, Chicago Stock Exchange and NASD. So
things have changed over time.
What I think will cause change more than anything else will
be the move towards demutualisation and public ownership where
entities themselves are going to be structured differently. It
was very hard in the past to merge one exchange into another,
the three that I've mentioned who have come and gone, that
wasn't based on consolidation of the whole institution. For
example, CBOE took over Midwest Exchange's option business in
the late 70s but Midwest remained as a viable exchange. We
bought the NYSE options business eight years ago, because they
decided they could not be a major player, but now under new
management they've decided they want back in. On the other
hand, Pacific Exchange was not viable so it merged with
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