Chicago Board Options Exchange
(CBOE)
Press Conference
September 10, 2015 at 10:00 a.m. Eastern
CORPORATE PARTICIPANTS
Edward Tilly - Chief Executive Officer, CBOE
Dr. Richard Sandor - Chairman, Chief Executive Officer of Environmental
Financial Products
John Deters - Chief Strategy Officer, CBOE
1
PRESENTATION
Operator
Good morning, and welcome to the Environmental Financial Products and CBOE Holdings
teleconference. All participants will be in listen-only mode. Should you need assistance, please signal
a conference specialist by pressing the star key followed by zero.
After this morning’s remarks, there will be an opportunity to ask questions. As a reminder, members of
the media and analysts will be allowed to ask questions. To ask a question, you may press star then
one on your touchtone phone. To withdraw your question, please press star then two.
Please note this event is being recorded. I would now like to turn the call over to Edward Tilly, CEO of
CBOE Holdings. Please go ahead.
Edward Tilly
Good morning, and thank you for joining us. Before I begin my remarks, let me dispense with a
formality by saying that our comments may contain forward-looking statements, which involve some
risks and uncertainties. Actual results may vary. Please refer to our filings with the SEC for more
detailed information about the risks and uncertainties.
With me today here at CBOE are Dr. Richard Sandor, Chairman and CEO of Environmental Financial
Products, and John Deters, Chief Strategy Officer at CBOE.
We have quite a few reporters on the line. So, I will invite Richard to make a few introductory remarks
before we open it up for Q&A. But first, I want to briefly say how pleased we are at CBOE to help bring
this exciting concept to light. I want to commend Dr. Sandor and his team on their vision for AFX and
their creativity in conceiving the Ameribor methodology, which we believe can revolutionize the
interbank lending and benchmarking processes.
I think everyone in the futures arena knows Richard as an innovator, and his ideas have revolutionized
many types of financial markets. The nature of the idea for AFX that he and his team brought to CBOE
immediately captured our attention and imagination. The ability to bring transparency, price efficiency
and transaction-based benchmarks to interbank lending is a groundbreaking opportunity that thoroughly
aligns with CBOE’s views, expertise and experience.
It is our great pleasure to be part of this venture, and to collaborate with the EFP team. Both EFP and
CBOE bring a very like-minded, innovative spirit and approach to a partnership that leverages the
complementary strengths of our respective companies. We are pleased that CBOE will host and
operate the AFX trading system, and we look forward to the launch of trading later this year.
With that, I will turn it over to Dr. Richard Sandor.
Dr. Richard Sandor
Thank you, Ed. Hello, everybody. It’s a great pleasure to be here with all of you today. For me, a very
exciting moment that is the culmination of more than three years of research into developing a product
that we thought would be useful for America’s small and mid-size banks.
This all started when the typical benchmark didn’t necessarily move with the funding costs of small
banks. And by small to medium-size banks, I mean roughly 1,700 or so with $5 trillion in assets. They
are a quarter of America’s banking deposits. But more importantly, they’re 35% of all of the business
loans. They’re 40% higher. They’re the ones who finance Caterpillar tractors and housing, and lots of
other industrial products. They have been left without a singular central marketplace.
Chicago Board Options Exchange (CBOE)
September 10, 2015 at 10:00 a.m. Eastern
2
And so, AFX thought that we could fill a void for these banks and create what you’ll normally have a
centralized electronic market. We have two business buckets. One of the buckets is to run an
overnight and 30-day market for small to medium-size banks. And that will occur on a daily basis.
We will build up a raft of other products, but that market alone, even in spite of post-recession activity is
$55 billion a day. It was in the hundreds of billions. And it has gone quiescent, and we think some day
in America, interest rates might rise. And this is a propitious moment to really launch something which
will help banks in their asset liability management.
Initially, that market will be a market-based measure of the cost of banks. So in effect, the overnight
and 30-day market will give us, day one when we launch, an indication of an Ameribor loans market. In
addition to that, we will have a second business bucket, and that business bucket will be a weekly
auction in which people will submit bids and offers. And that will be an Ameribor pricing point, and it will
be one day a week.
So, we’ll have two alternatives. The first one will create liquidity for interbank markets and actual
lending and borrowing, and the second will be a benchmark. And either of those may become the
asset liability management tool, will let the market decide, and they will do that.
We are delighted with the partnership with CBOE, and the friendships, and my particularly, we’re sitting
in a room of previous chairmen. I think I said, “Dad, I kind of know everybody on the wall.” And so, I
watched it being born in ’72. I’ve been an admirer; I’ve been a friend, and I thought this is the perfect
partner. It couldn’t be better. Its hallmark is it’s been established when it—it actually was the first
organized exchange for options in America. It broke track, and that’s continued over the years and
most recently, VIX.
Certainly, an exchange that has an equity in futures, but doesn’t have this component would be a winwin situation for both of us and could lead to futures markets on these interbank products, options,
volatility indexes, ETFs. So, we’re into a whole world that we’re extraordinarily excited about.
I’m very pleased to have Ed Tilly as a board member of the American Financial Exchange. He will join
other notable people like the Honorable Carole Brookins who was ex-director of the World Bank,
appointed by Bush and approved by the Senate; a woman of international well-renowned. We will have
Robert Albertson, who’s the Chief Strategist at Sandler O’Neill and well regarded, and we are talking to
some very prominent ex-Fed people to fill another independent spot.
So, the governance will be a board. We will run the business like an exchange. We’ll have a new
Products Committee, a Compliance Committee, etc. This will be member-driven. The products have
been designed with 60 banks giving us input from California in the west to Massachusetts in the east to
Minnesota in the north and to Louisiana in the south. We have covered as many different regional
interests, which make up the core and fabric of our business.
Those committees will make recommendations to the board of directors, and we will normally act with
that. So, we will be member-driven. We will also have two advisory board members of regional and
small size, middle size banks to work with our board of directors to make sure that we have a constant
input from the banking sector.
Our governance is that simple and that direct. Again, we will design the products market. The CBOE
will operate the electronic platform, will help us with market surveillance, and we will take an opaque
OTC market and by our design, turn it into a transparent central market, and we hope generate a whole
pool of liquidity that doesn’t exist in the marketplace. And we hope to, for that community, create
Chicago Board Options Exchange (CBOE)
September 10, 2015 at 10:00 a.m. Eastern
3
benchmarks that are reliable and that are determined by the competitive forces of supply and demand
and serve the small businesses, the farmers, the smaller housing markets throughout the United
States.
In conclusion, I couldn’t be more excited. I had the privilege of working on new products in a variety of
areas, and I have to say financial futures was fun and emissions trading was fun, and catastrophe
bonds were fun, but I’m more excited about this product than I have any other product in my 50 years in
this business. Thank you, all.
W
Thank you. We’re ready to take your questions now
QUESTIONS AND ANSWERS
Operator
We will now begin the question and answer session. As a clarification, we will now take questions from
both media and analysts. To ask a question, you may press star then one on your touchtone phone. If
you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw
your question, please press star then two. At this time, we will pause momentarily to assemble our
roster.
The first question comes from Dan Collins, Futures/Modern Trader Magazine. Please go ahead.
Dan Collins
Hi, Ed. Hi, Richard.
Dr. Richard Sandor
Hi, Dan.
Edward Tilly
Good morning, Dan.
Dan Collins
A new market. Richard, I guess the basic question is, you’ve started several markets. What is the risk
to these banks, and what’s the inefficiency out there that’s not being served that you’re going to sell?
Dr. Richard Sandor
Basically, Dan, it’s simple. They are in a bilateral market. There’s no screen. They may be borrowing
overnight at 7 basis points at one bank, 11 basis points another, 13 another. They may have to contact
five brokers to get it executed, and we’re going to offer a lower priced alternative, and we’ll create a
central liquidity no different than exchanges have done for hundreds of years in this country.
The model is just to take it out of the closet, put a bright light on it and put all buyers and sellers in a
central marketplace. It’s that simple.
Dan Collins
Okay. So, it’s really similar to the launch of financial futures in the ‘70s where it was just an opaque—
Dr. Richard Sandor
Very much. It is, to me, remarkably similar to the bond contract and the 10-Year. Instead of having an
OTC dealer market with no price discovery, no transparency, wide bid-ask spreads, higher cost for
borrowers and lenders, we’re going to hopefully do for the banking and the interbank market what was
Chicago Board Options Exchange (CBOE)
September 10, 2015 at 10:00 a.m. Eastern
4
done with treasuries for the government market, thereby reducing borrowing costs and lending costs by
collapsing the bid-ask spread.
Dan Collins
All right.
Operator
Mr. Collins, do you have any further questions?
Dan Collins
No. That’s basically it. Thanks, Richard.
Operator
Thank you. The next question comes from Phillip Alexander of Financial Times. Please go ahead.
Phillip Alexander
Thank you. I just had a couple of questions. The first is about the level of transparency or anonymity in
the market. Is this going to be a fully transparent market where everyone can see who all the
participants are, or are the quotes going to be anonymous for a certain amount of time?
And the other thing, regarding the Ameribor Index, obviously there are these recommendations from
the Financial Stability Board and IOSCO about benchmarks. Have you sort of tried to build those into
the development of this so it’s already designed to be a benchmark that will comply with the best
practice that’s being recommended?
Dr. Richard Sandor
Yeah. The answer to the first question, it will look like any screen, like treasuries, like VIX. It will be a
constant stream of quotes and distributions. The counterparties, as in all exchanges, will not be public.
That’s the traditional standard, but in fact their bids and offers will be. We will protect the anonymity of
our members, but we will provide insights into who they are, and will basically—as you can see in the
press quotes, they will identify themselves. But, our job is to promote transparency within the market,
but provide anonymity for those users as we do in all markets.
The answer to the second question is, most definitely.
We want to go further than the
recommendations. Day one that we start the Ameribor loans market, you’re going to be able to see
actual trades occurring. This will not be any estimate, or it won’t be derived from other liquidity. It will
be the liquidity itself. It will be the weighted average of the daily volume from 7:30 in the morning until
4:00 or 3:30, and you will see and we will be able to provide a ticker of every single transaction that
occurred.
That goes far beyond, I think, and we hope satisfying the regulators, and the CBOE will be monitoring
that, looking it over. We have a rule book that will prevent spoofing and other untoward. So, I think this
is going to be the most transparent market-driven index that exists, and we hope to get ahead of the
curve, not behind the curve.
And most importantly, it’s needed because these 1,700-1,800 banks and another 6,500 banks are not
the most sophisticated in terms of having a central market devoted to meeting their needs. So, we’re
going to be putting quotes into Louisiana and Oregon and Minnesota, into community banks that are
not watching tickers, and they won’t have to operate in the blind.
Phillip Alexander
Thank you.
Chicago Board Options Exchange (CBOE)
September 10, 2015 at 10:00 a.m. Eastern
5
Operator
The next question comes from Terry Flanagan of Markets Media. Please go ahead.
Terry Flanagan
Hi. It’s Terry Flanagan here. Just a question of I’m wondering; it sounds like the way this is being
presented, this is a product that’s a long time coming. I’m just wondering in your due diligence in
developing this, I’m wondering what is the history of any previous attempts to create something like
this, and what may have worked, or what didn’t work, and what you may have learned from that and
how you can possibly avoid any failures that have already happened with this current venture. Thank
you.
Dr. Richard Sandor
Well, I can only tell you I’ve had some small successes and a lot of failures. I hope this is the result of
40 to 50 years of stars. One of the things that excited us is we like to work on transformational things
and events, and where you can have a significant impact. And what really struck me was seeing and
learning that there were no previous things. We had goal fixes and we had Libor and these were all
very processes than multiparty continuous auctions.
And for us in Chicago, that’s what you do. You bring a lot of buyers and sellers into it, and their actions
in the marketplace determine what the price is. VIX is quoted all over the place. You want to know
what the price of wheat in Thailand is, you look at the wheat futures in Chicago and you extrapolate
shipping, handling, grade differences, and you know what it is in Bangkok or Rotterdam, and that’s the
point here.
We will have a benchmark, and a benchmark that people will rely on, both with the daily cash market,
then a futures market. We’re going to do, plain and simple, what we’ve done in this city since 1848.
Terry Flanagan
Thank you.
Operator
The next question comes from John Lothian of John Lothian News. Please go ahead.
John Lothian
Hey, Richard. Can you hear me?
Dr. Richard Sandor
I can always hear you, John.
John Lothian
Hey, congratulations. Hey, two questions. Is this an intermediated market as in a brokered market that
there will be a layer there of it, and who do you expect those players to be? And then two, who are
going to be the regulators for this?
Dr. Richard Sandor
Number one, there will be no brokers in this market. It’s going to be a principle-to-principle market.
Okay? So, the banks will have direct access to the exchange and to the offers. And so, there won’t be
any intermediaries that are members of the exchange. So, that’s the first answer.
The regulation will be self-regulation. We will have a book of rules and covenants. It will be much like
the mutual exchanges that existed. The markets are exempt from regulation. The CBOE will be our
Chicago Board Options Exchange (CBOE)
September 10, 2015 at 10:00 a.m. Eastern
6
partner in marking sure that rule book is followed.
And one of the reasons we joined with them is they have vast experience from securities to
commodities, and they’ve got a portfolio of products that’s really quite unmatched from the regulatory
side. And we, of course, have checked and gotten very good advice from Sullivan & Cromwell, and Raj
Kohne [ph] who is a key banking regulator. We briefed the government and given everybody a heads
up on what we’re doing, John.
And most importantly, we think we’re going to be alike and turn Chicago and its proven 100 year
practices and make it a focal point for small banks in America.
Edward Tilly
So, John, Ed Tilly. So we will, at CBOE, provide the electronic surveillance to monitor the activity and
make sure that the activity is in accordance with the AFX rule book. So, that’s part of CBOE’s role.
John Lothian
Okay. So, it doesn’t fall within the realm of say a [indiscernible] execution facility, or any of the DoddFrank rules.
Dr. Richard Sandor
While the banks are subject to government oversight, this will not fall directly under SEC and CFTC at
this point.
John Lothian
Okay. Great. Cool. Well, thank you and congrats.
Edward Tilly
Thank you.
Dr. Richard Sandor
Thanks, John.
Operator
The next question is from Brian Louis of Bloomberg News. Please go ahead.
Brian Louis
What is the ownership going to be, and for Ed, does this—you guys are known for your proprietary
products. This seems a bit unusual for you guys, or just a little different. Explain the rationale for why
you guys are doing this, and any insight on the ownership structure.
Edward Tilly
So, just initially, I think when you heard Richard describe how they are bringing this to the market from
the design phase and the interaction with the community of users, that’s right at our core. That’s how
we develop products. That’s how we like to bring things to market.
Tradable benchmarks, transparency - that’s everything that we believe in. So, when Richard brought
the idea, we were so excited to be part of this. As an exchange operator, that is our core. We are
extremely well suited to partner with this terrific idea and operate the exchange.
From an ownership perspective, while we won’t provide the details at this point, being able to have an
ownership stake and, as Richard mentioned, a seat on the board was very important to us. So, to be
involved in that product development that AFX will be undertaking in the coming months and years and
Chicago Board Options Exchange (CBOE)
September 10, 2015 at 10:00 a.m. Eastern
7
having a seat at the table is very much aligned with our goals and what we’ve done in the past.
So, while a little different, the strategic investment here, while not material at this point, we see just a
terrific upside in the ability to grow this with the team on new product development going forward.
Brian Louis
Thanks.
John Deters
Brian, this is John Deters. I’ll put one more point on that. To the earlier question to Richard about the
construction of the benchmark, we talked in our introductory remarks about how this concept when
Richard brought it to us resonated so deeply. VIX at heart is a transaction-based benchmark. The
index itself is based on transactions where people are putting money at stake. The settlement is based
on a transaction process where people are putting money at stake. So, we got what he was trying to
describe here, and we think the market will appreciate it as well.
Brian Louis
Thanks very much.
Operator
The next question comes from Mark Sebastian of Option Pit. Please go ahead.
Mark Sebastian
Hi there, guys. So, I’m just trying to completely wrap my head about how you guys plan on structuring
this. So, the goal is to get the Bank of Brookfield, Illinois or the Bank of Shreveport, Louisiana to trade
directly through the interface, or is it to be an interface for banks to contact the likes of Sandler O’Neill
or a Cantor and get a quote from that and then have it executed in that manner? If it is the former, how
do you plan on educating these small banks that are, in many ways, used to being kind of told what to
do because that sounds like a big process.
Dr. Richard Sandor
It’s pretty simple. There will be no intermediaries like Sandler or Cantor. Each bank will have a webbased access to a market, will have a screen that will be up there. The screen will basically provide all
bids and offers. It’ll show the ladders, and it’ll also show, which we think is very exciting, ladders of
acceptable counterparties. So for example, if the bank in Louisiana has credit lines to an Illinois bank
or a Nebraska bank or a North Carolinian bank, it will see those bids and offers in green.
It will also see, which we think is a very, very high value-added prospect; it will see in red the bids and
offers of the banks that they don’t have relationships with. We’ve already had a reaction from a CEO,
$10 billion-$20 billion, small bank, that’s saying this is going to help us see where we stand credit-wise.
And as a matter of fact, yesterday one bank calls another bank. They’re both in the same region, both
$10 billion banks, never spoke to each other and now have established credit lines.
So, we’re going to see this transparency fill itself out, and the CEO actually said to me, “I’m going to be
able to call my CFO and say there’s too many reds here. How do we present our case that we’re credit
worthy to our colleagues in the business?”
So, we think just that screen alone is a real value prospect, and it’s already turning into—we haven’t
even started where banks are contacting each other and are saying, “Are you doing business on the
AFX? We don’t have a credit line with you. Can we start establishing it?”
So, we think we’re going to form a coalition of the willing.
Chicago Board Options Exchange (CBOE)
September 10, 2015 at 10:00 a.m. Eastern
8
Edward Tilly
We talk about transparency as a virtue, but transparency is empowering as well, and that ends up
selling itself to the banks who participate.
Mark Sebastian
Okay. Thank you.
Operator
The next question comes from Jim Kharouf of John Lothian News. Please go ahead.
Jim Kharouf
Hi, guys. Sorry to hit you from two different angles with John and myself. Just real quick; I understand
it’s a bilateral market. Is there any clearing function involved at all with these transactions, or do you
foresee a clearing function coming into play at some point down the road?
Dr. Richard Sandor
The nature of the transaction is very simple, and it’s in accordance with the way the cash market
operates. It just brings efficiencies that aren’t there.
So, let’s assume, Jim, that a lending bank hits a bid to a borrowing bank. That transaction goes directly
to the Northern Trust, and then Northern Trust has two accounts from the lending to the borrowing.
The lender sends the money into the Northern Trust. The Northern Trust transfers the money from
their account to the borrowing account, and the exchange AFX or the CBOE does not touch the money
in any way, shape, or form. It’s handled through the settlement bank. And so, it’s a very clear process.
Jim Kharouf
Got it. Thank you very much, Richard. And one quick follow-up question; as you look to add member
banks to this, just anecdotally, how are you going to attract them, or kind of build that base? What’s the
strategy to bring them upwards?
Dr. Richard Sandor
Jim, it’s much like CCX. We and my team is going to work 24/7. We’re going to be at banking
conventions at every small town that you can imagine. We have identified what we call nine magic
steps, which we talk about in our books. We’re going to be educating regulators. We’re going to be
speaking at universities. We’re going to get professors to write. We’re going to hold forums with the
press.
We are going to, in fact, incentivize the banks with ownership in the exchange. We’re going to do the
things that we have done to create a community and build consensus, and get every opportunity to
work with firms and say, “What are the opportunities in this new business? Who wants to know about
it?”
I think we know, and we’ve said it publicly in books or what not, [indiscernible] people in financial
futures with two small traders that we worked with in the ‘70s. And one was a guy by the name of Bill
Gross, and another was a guy by the name of Larry Fink. And they both were experimenting in the
Chicago markets.
I believe we’re going to develop a class of human capital, and that somewhere in this world that we’re
living in that there will be somebody in some bank who will use these tools for asset liability
management. And there will be a spike, and the bank will have covered itself in glory, and the peers
will say, “Why weren’t we using AFX?” And that’s the way it unfolds.
Chicago Board Options Exchange (CBOE)
September 10, 2015 at 10:00 a.m. Eastern
9
You start a market when things are quiescent, nothing much happens like VIX, and then all of a sudden
it’s 30%-40% implied volatility. You start an oil market in ’78 and you get an Arab oil embargo. The
tradition and the history of markets is quiescent times, a shock to the system, and the emergence of
young individual traders who have learned modern risk management techniques. And I would expect
this to fall into that pattern.
And it’s really exciting because the banks that we’re talking to today are filled with those young people.
They’re in the young treasurers. They’re out of business schools. They’re MBAs. They just want to
use these tools. And the fact that there’s a new one excited them.
Jim Kharouf
That’s great. Thank you very much, guys. Good luck to you.
Dr. Richard Sandor
Thank you.
Operator
Again, if you have a question, please press star then one. The next question is a follow-up from Dan
Collins of Futures/Modern Trader Magazine. Please go ahead.
Dan Collins
Hey, Richard, again. This sounds really close to what ICE did when they put OTC trading of energies
on a transparent platform because this is still going to be bilateral trading except other people can see
the different bids and offers.
How do you see this evolution? Do you think that you will eventually create a contract, or a futures
contract that will be a benchmark? And if that happens, would the clearing function come in, or do you
see this kind of continuing to be just kind of a transparent bilateral market between banks? And how
are you going to profit from this? How is the exchange going to profit from this market?
Dr. Richard Sandor
Well, number one, if you were in the room, you’d see Ed’s smile and John as well. Of course, we’re
going to move to that. The ICE model worked well for them. The VIX model worked well for the CBOE,
and we’re just going to follow that routine and develop a class of commoditized products out of these
bilateral markets.
We’re not doing anything complicated. This is real blocking and tackling, and that’s how we do it. The
exchange business model will be membership fees and transactions cost per trade. It will be very low
compared to other ways of doing business, and we hope to benefit the shareholders through generating
revenues from all of those traditional things that exchanges do - data sales, transaction fees,
membership.
Dan [indiscernible], there’s an old [indiscernible] in this business when you introduce a new product don’t get innovative on top of an innovation. It complicates the thing. So, we’re trying to be very
standard and very simple, and not invent any new wheels. We’ve already invented a car. We better
not fool with the wheels.
Dan Collins
Okay. I mean, do you anticipate creating a contract on this, and that would be kind of a more
standardized market as more banks—if this proves to be efficient that you’ll get every one of these
banks in and they’re all members of the exchange?
Chicago Board Options Exchange (CBOE)
September 10, 2015 at 10:00 a.m. Eastern
10
Dr. Richard Sandor
Look, I can’t say what the mechanics are, but you can do the numbers. The cash markets, whether
they’re for treasuries, corn, beans, FX, you name it, typically trade 10 to 30 times the underlying spot
markets, okay? That’s the multiple that futures and derivatives have. And if we look at this market,
treasuries will trade 30 times; corn will trade 12 times the crop.
The crop here was $150 billion-$200 billion a day. It’s now $50 billion. Put a 10 to 30 multiple on it,
and I’m not saying it’s going to be successful, but use the analytical tools that exist. For those people
who follow markets, think of the upside potential of 10 to 30 times a market that’s traded $50 billion to
$200 billion a day.
Edward Tilly
And the key point here is the Ameribor benchmark design that Richard and his team have created
provides the link between the bilateral marketplace and a potential set of contracts on that marketplace.
Dan Collins
Okay. That benchmark will be a price per billion dollars for loans, or based on some rating of a bank?
Dr. Richard Sandor
No. It won’t be a rating of a bank. The idea is to create a homogeneous thing. The only weighting that
will occur will be the volume weighted transaction, and the volume weighted of an actual transaction. If
somebody posts an offer of a million dollars and $80 million trade at one basis point higher, that $80
million that traded would be the benchmark. Whether we do it based on daily trading and
encompassing a day, or a close, or the weekly auction, every alternative that we are conducting will be
basically homogenous and the only thing that counts is the volume weighted measure of traded loans.
Operator
And next, we have a follow-up from John Lothian of John Lothian News. Please go ahead.
John Lothian
Actually, my associate, Doug Ashburn, who’s here with me has a quick follow-up for you, Doc. Here
you go.
Doug Ashburn
Congratulations, gentlemen. Best wishes on your new venture. How would you respond to someone
who wants to know why the traditional market is not serving these people? I mean Libor is moving to a
more transparent format, and other traditional benchmarks as well. We have a robust market for
eurodollars and swaps. Is this part of a supposed bifurcated market down the road between the too big
to fail institutions and everybody else, or is there something else that this market is actually going to
serve that isn’t served by traditional products?
Dr. Richard Sandor
No. Small banks throughout the country. We have 6,500 banks in America, and 14 are the big ones,
and we’d like to focus on the 6,464, or 84, whatever the regional numbers are. We’re serving a market
that has not been served.
Doug Ashburn
[Indiscernible]
Dr. Richard Sandor
Sorry, you’re cutting in and out.
Chicago Board Options Exchange (CBOE)
September 10, 2015 at 10:00 a.m. Eastern
11
John Lothian
So, this is John, again. So, a lot of times, it’s the bigger banks that are serving the smaller banks. How
are you expecting the big banks to respond to the loss of the customer relationship there?
Dr. Richard Sandor
Oh, I’m confident that they will find commercial opportunities. Transparency you guys know better than
anybody, and central markets always are met with a degree of skepticism from some less than broad
thinkers who like opacity. And the history of Chicago has been that transparency helps all players in
the long run, whether it’s VIX, whether it’s treasury bonds, whether it’s wheat. There isn’t anybody at
any time when a new market starts, in my experience, in any physical commodity financial in any
country, from the UK to France to China most recently, Japan that people have said, “Oh, my God.
What’s going to happen to the larger players, and the fact that they may lose business?”
And my humble experience is, I don’t know, we take a look at the exchange business and look at the
market caps of the exchanges, and clearly finding a value proposition. So, I would say somehow, I
don’t know how, but transparency, new types of hedging tools if they work will serve big and small.
Edward Tilly
John, exactly the point that really interested CBOE is the transparency and standardization. This is
what we look for in any new product, in any new design, and Richard just nailed it.
John Lothian
Okay. Thank you very much.
CONCLUSION
Operator
This concludes our question and answer session, and this morning’s teleconference. Thank you for
joining us. You may now disconnect.
Chicago Board Options Exchange (CBOE)
September 10, 2015 at 10:00 a.m. Eastern