Schwab & Co.’s Tony McCormick Takes Helm at Boston Exchange
October 23, 2009
After a 16-month search, the Boston Options Exchange has hired Charles Schwab & Co. veteran Tony McCormick to be its chief executive officer – in Chicago.
McCormick replaces Will Easley, BOX vice chairman, who has filled in as acting CEO since Scott Morris departed in June 2008. He will be based in the exchange’s Chicago office.
“Tony’s demonstrated success and keen understanding of the trading world is a strong complement to the innovative strategies and creative team at BOX,” Easley said of McCormick’s appointment.
McCormick was most recently responsible for managing Schwab’s trade execution quality group and extensive business relationships. Previously, he spent 12 years with Harris Futures Corporation including as CEO from 1993 to 1997. During that time, McCormick was managing director of Capital Markets for the Bank of Montreal and served on its Treasury Board.
In an interview with Securities Industry News senior editor Alexa Jaworski, McCormick discussed his goals for BOX, the firm’s move from a maker-taker to payment for order flow (PFOF) fee model and the competitive landscape.
What appealed to you most about this new position?
A couple things. We are very efficient, we have very good technology here, we operate profitably at the level of business we are doing. Every marginal piece of business we can bring in goes right to our bottom line. I also like the fact that the management structure is very streamlined. We have a relatively flat operating structure, there aren’t a lot of layers of management that you have to go through to make a decision.
At Schwab, you managed the firm's trade execution quality group. How do you plan on applying that experience to BOX?
That was one the last role I had with Schwab, managing order flow on the equity options side. I’m highly familiar with that process and what’s involved. I want to take that experience to BOX. What I’d like to do is induce flow to come to BOX so retail customers can take advantage of price improvement.
BOX recently decided to move away from the maker-taker fee model to PFOF. What have been the benefits of this?
We are pretty early on in the process. We are going to try to refocus the level of inducement. It was a sea change in itself to pay liquidity takers when we had the reverse model in place for some period in time. I think we need to fine-tune that and we are going to introduce some pricing changes relatively soon to address that and I think BOX will benefit greatly when we fine-tune the strategy. We got in a sort of in a “neither here nor there” position. We really weren’t at the forefront where taker incentives were being provided at other exchanges, and yet we weren’t the maker-taker model we were before. By refocusing and fine-tuning those incentives, we’ll be much more aligned with the traditional model that provides incentives to retail order flow.
What are some of your short-term goals for BOX? Long-term?
My short-term goals are pretty simple. We want to refocus our strategy and orient that focus around serving retail options customers. The essential element of that refocus is to induce retail flow to participate in our price improvement process, the PIP. That’s good for customers. We recognize there is economic value embedded in retail flow so we want to provide the right incentive to the providers of that flow. At the same time we want our customers to participate more fully in our PIP and therefore get price improvement on their trades. If we can do that, it’s a win-win. To me, the long-term for us is right now addressing the short-term. If we do that effectively we will be around for the long-term.
