Downtown Chicago needs help recovering from the pandemic, as office closures and a public safety crisis continue to weigh down the city’s business district. So, it’s with a mix of gratitude and mild disbelief that we welcome the launch of something most Chicagoans probably thought they’d never see again: A new open-outcry trading floor.
On the morning of June 6, CBOE Global Markets is scheduled to ring the opening bell at its new venue in the same Chicago Board of Trade building at the foot of LaSalle Street where the options market got its start in the 1970s — and where the shouting and arm-waving of open outcry ruled for decades until computers mostly took over.
On any given day, as many as 400 options industry professionals are expected to work at the new, 40,000-square-foot space, which is designed to accommodate the in-person trading still preferred by some customers of CBOE products that also trade electronically.
Hoarse-voiced traders in their colorful jackets once personified the creative intensity of commerce in Chicago, and we are delighted to see this “West of Wall Street” tradition live on in the wake of COVID-19.
Successful traders are known for their timing, as well as their ability to adapt when the markets throw curves. Those qualities have come in handy after the pandemic temporarily upended CBOE’s downtown real estate plans.
In September 2019, a few months before COVID-19 struck the city, CBOE announced a deal to relocate its Chicago headquarters to the Old Post Office at 433 W. Van Buren St. That cavernous, art-deco structure had once helped connect Chicago to the rest of the world by mail, until it became obsolete and sat unused for years. A competent developer finally took it over and, with city tax credits, undertook an ambitious renovation of the landmark structure, which straddles Ida B. Wells Drive (formerly Congress Parkway).
At the time, companies based in the suburbs were eager to move downtown and many sought offices with large, open floor plans such as those available in the renovated building. CBOE agreed to lease 185,000 square feet for its Chicago staff, which at the time made up about half of the publicly traded company’s employees.
CBOE simultaneously announced plans to move its remaining trading pits to the seventh and eighth floor of the Board of Trade building, whose tenants include banks, trading firms and other financial companies. CBOE got its start in the smoking lounge of the same building, a company spokeswoman noted, pioneering the equity-options business before moving across the street to 400 S. LaSalle in 1984.
What’s old, truly, is new again. But why? Haven’t computers taken over the trading biz?
Surprisingly, not all of it. Among its most successful products, the CBOE trades options on the S&P 500 Index, a broad measure of the stock market, as well as options on the CBOE Volatility Index, known as the VIX, which measures the market’s balance between fear (as in panic selling) and greed (buy, buy, buy). The indices are getting a workout these days, given the extraordinary market volatility.
And, yes, even today, large institutions with complex trading strategies regularly choose a human broker to “work” their orders, as opposed to filling them automatically on screens, which could prematurely reveal their plans. About one-third of CBOE’s index-option trading is executed by open outcry, not computers. Overall, as of this spring, 17% of CBOE’s volume in all products was done by hand.
What’s perhaps most remarkable is that open-outcry survived COVID-19. The virus threw CBOE’s plans into disarray, as it did at so many other downtown businesses. The exchange was forced to temporarily close its trading floor, shift to an all-electronic format and send employees home to work. As of today, CBOE’s offices at the Old Post Office are open, a spokeswoman said, and most employees whose jobs can be done remotely are dividing their working hours between office and home.
With any luck, CBOE’s downtown comeback will inspire other businesses to make their way back to the Loop and bring about the renewal every Chicagoan wants to see.
Given the slow return to offices, the damage done to downtown stores and restaurants by the pandemic and the ongoing threat of violent crime, green shoots like the Cboe’s can’t spring up soon enough. May more follow.
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