When Cboe Global Markets launched its recent search for a new chief executive officer, Chicago was a priority.
The “C” in Cboe stands for Chicago, after all, and acting CEO Frederic Tomcyzk acknowledged that the company’s next leader would need to be a fixture along LaSalle Street. “A strong presence in Chicago is going to be important,” he said earlier this spring.
In May, Cboe tapped Craig Donohue, then-chairman of the Chicago-based Options Clearing Corp. and formerly CEO of Chicago’s CME Group. There’s “no doubt,” Tomcyzk said, that Donohue will “lead Cboe to new heights.”
But how, exactly? For all his Chicago bona fides, Donohue has a history of aggressive dealmaking, and Cboe is a perennial takeover target. It is much smaller than rivals like CME and the Intercontinental Exchange (ICE), among other big financial companies that could comfortably swallow it whole.
On Oct. 31, Chicago got an early read from Donohue about Cboe’s future. In a conference call with Wall Street, he announced that Cboe would trim its global footprint, putting a for-sale sign on operations in Australia and Canada that it had spent years building. Some business operations in Europe will be trimmed as well.
Instead, Cboe will chase what Donohue considers juicier opportunities, including event and prediction markets and trading of digital assets like cryptocurrency. “There’s extraordinary growth there,” he told investors.
From Chicago, those markets can be accessed electronically by customers around the world. In contrast to Cboe’s hard-won beachheads in Sydney and Toronto, no far-flung local presence is required. For now, Donohue also said, Cboe will focus on “organic” growth, as opposed to the big mergers and acquisitions that marked his tenure at CME.
So, there you have it: One of Chicago’s most “Chicago” companies is on track to become even more “Chicago.” It’s a fitting move for a local icon spawned in the 1970s as an offshoot of the Chicago Board of Trade.
At the time, the Board of Trade was a membership organization composed of boisterous traders who made their living via open outcry. For decades, that shouting and arm-waving in trading pits was emblematic of Chicago’s business community.
Options markets were even less developed than the prediction and crypto markets that Donohue has his eye on today. To the extent they existed, stock options were traded over the counter in New York, with no exchange or central clearing house.
The Chicago Board Options Exchange, as Cboe was known, began life in the Board of Trade’s former smoking lounge at the foot of LaSalle Street in 1973. A decade later, it moved across the street to a spiffy building of its own at 400 S. LaSalle.
It barely survived the 1987 stock crash, when its markets practically shut down during a stretch of extraordinary volatility, alienating customers. The exchange overcame the black eye, attracting a more cerebral membership than the rough-and-tumble traders who filled the corn and cattle pits at the larger Chicago futures exchanges, which have since consolidated into CME.
In the 1990s and beyond, the exchange tapped its home-grown brainpower to innovate in a big way, including the launch of its VIX volatility contract, an important market benchmark today. The exchange extricated itself from the control of Board of Trade members and went public in 2010.
It overcame another scandal two years ago when a former trader-turned-CEO stepped down after an internal probe uncovered his “personal relationships” with colleagues, paving the way for Tomczyk and now Donohue. The disgraced CEO’s leading protégé, an energetic Englishman who served as Cboe’s global president, also left the exchange after Donohue’s appointment.
Under the Cboe Global Markets name, the company has extended its roots in downtown Chicago. In 2019, it announced plans to relocate its headquarters to the Old Post Office, and, improbably, launch a new open-outcry trading floor. The guys in colorful jackets live on at the company’s busy downtown operation, which breathed new life into a deserted business district when it opened at the tail end of the pandemic in 2022.
That move alone set Cboe apart from the many companies that have made the suburbs their homes or, as in the case of Citadel, Boeing and others, exited Illinois altogether. A pandemic crime wave, and Mayor Brandon Johnson’s attempts to hike taxes on any big business that dares to operate in the city, have made it tough to retain important corporate citizens.
After his election, Johnson floated a city tax on financial transactions, a longtime fantasy of his former employers at the Chicago Teachers Union that highlighted their ignorance about how today’s mostly electronic markets can swiftly relocate. Having failed at that money grab, the mayor now has proposed a destructive corporate head tax that the business community is staunchly opposing.
Here’s hoping Cboe Global Markets will sidestep the mayor’s heedlessness to killing the city’s golden geese. We will be rooting for Donohue to bring about the growth bonanza he’s anticipating for a company that remains, so far anyway, deeply committed to the city. Chicago needs more like that.
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