Exchanges a 'Bright Light' in Crisis, Says CBOE Head
In global leadership role, Brodsky tackles short-sale rules, fragmentation
March 30, 2009
In a global financial crisis, cooperation and coordination among the world's exchanges takes on a new light, according to William Brodsky, chairman and CEO of the Chicago Board Options Exchange (CBOE). As chairman of the World Federation of Exchanges (WFE), Brodsky is playing a leadership role in many of those efforts.
Brodsky began his two-year term at the WFE in January, becoming the first head of a derivatives exchange to lead the organization. His election reflects the WFE's increased focus on asset classes beyond equities. "We are reaching out now to options, futures and even traditional commodity exchanges," said Brodsky at the annual Futures Industry Association conference in Boca Raton, Fla. earlier this month.
Last year, Brodsky encouraged the Chicago Mercantile Exchange (CME) and energy and soft commodity market operator IntercontinentalExchange (ICE) to become members of the WFE. Before moving to CBOE in 1997, Brodsky had been president and chief executive of CME since 1985. He joined the Merc in 1982 as EVP and chief operating officer, leaving his role as EVP of operations at the American Stock Exchange.
In an interview with Securities Industry News, Brodsky discussed the WFE's agenda, as well as that of his own exchange. WFE's current goals? Helping the International Organization of Securities Commissions set best practices for short selling and securities lending, studying the effects of market fragmentation and working to bring clarity to the use of circuit breakers, which halt trading during periods of high volatility.
What do ICE and CME bring to the table as derivatives exchanges?
Even though you don't think of NYSE Euronext as a derivatives exchange or the Singapore Exchange as a derivatives exchange, over the last five to seven years, because of consolidation, these traditional stock exchanges have all become, in many ways, multi-class exchanges. People weren't sure that I would be elected because of the fact that I wasn't coming from a stock exchange. I think it shows that the organization has grown in its own perspective.
How is the WFE addressing the financial crisis?
Our two top issues are the short-sale issue and the trading halt issues. One of our other initiatives is to explain to regulators and governments that in the midst of the downturn, one of the bright lights has been regulated exchanges. They are one of the things you haven't heard problems with. The transparency, the mark to market, the counterparty clearing, the margin calls--all of the things that make our markets work so smoothly have worked smoothly in spite of the market downtown. What we're trying to say is, when you look at the problems, look at what has worked well.
What are some of the technological and operational challenges shared by WFE exchanges?
I think one of the big issues we have is [dealing] with the current market turmoil and things like the short-sale rule, where that's a real concern of many WFE exchanges. Our goal is to speak with a common voice on behalf of the membership of WFE.
How is CBOE approaching those issues?
Clearly many of the events of the last few months were years in the making, and we have much work to do to ensure that our markets are operating under an effective regulatory system. CBOE has long led the charge regarding the need for a more coordinated and effective approach to market regulation. CBOE has historically been a leading advocate for our customers and market participants and will continue to work with Congress, Treasury, the SEC and other regulatory bodies to hopefully design a more comprehensive approach to regulation.
