April 26th marks the 40th anniversary of the Chicago Board Options Exchange. While that makes it a mere youngster among Chicago exchanges, it is the pioneer that kicked off the equity options exchange industry in the United States in 1973 that is now global.

CBOE is also celebrating a few other notable birthdays this year as well – 30 years for the S&P 500 and S&P 100 or OEX, and 20 years of the CBOE Volatility Index, or VIX, which became a tradable futures product in 2004. Pretty nice round numbers for an exchange that ended 1973 with about 1.1 MILLION contracts traded and concluded last year with 1.1 BILLION.

With these key dates all coming together, John Lothian Productions, our budding commercial video division of John J. Lothian & Co, was hired by CBOE to tell the exchange’s story. So we embarked on a six-month video project, documenting the exchange’s creation, launch and growth from interviews with 10 executives and traders who spanned more than four decades at the exchange. We looked through hundreds of pictures the CBOE archives, video footage and charts. The video, titled CBOE 40, lets them tell the story of how the exchange went from an idea to the largest options market in the world.

We gave the video the look and feel of a commemorative magazine and designed the video to work in tandem with a traditional print layout. We took old photos of the first board of directors and through the magic our own Patrick Lothian’s video editing, turned them into 3D-esque images. And while those are cool visuals, the interviewees really tell the story, along with Jon Najarian (AKA Dr. J) as narrator.

We were fortunate to speak with some of the founders and executives who helped create the exchange under the Chicago Board of Trade’s stewardship. Joe Sullivan, the first president of the exchange and really the founder, flew from his home in Tennessee to Chicago to speak with us.

The soft-spoken Sullivan, who rightfully has the options industry’s highest award in his name, shared wonderful moments in the planning and early days of the exchange. There was his conversation with an SEC official in 1969 who told him that the agency had virtually no interest in approving an options exchange and said, “You shouldn’t waste a nickel on it.”

There was another battle for years over the SEC’s approval of put options in 1977, four years after CBOE’s launch with just 16 options on stocks, but only on calls. Sullivan said he pushed for puts because, “Calls without puts was like ham without eggs.”

There is Bill Brodsky, industry historian who is also known as the CBOE chairman and CEO, who steps down in May to the post of executive chairman. His candor about the challenges and frustrations alike was refreshing. He gritted his teeth talking about the five-year battle with the CBOT over CBOE exercise rights and the hoops he jumped through to bring the exchange public.

There were conversations with former vice chairman like Tom Bond, Mark Duffy, Bill Floersch and Gary Lahey who watched the exchange grow from the former smoking lounge at the CBOT to a double-decked trading floor above the historic CBOT trading room (now home to Peak 6) to its own building across the street. Each can tell story after story about how this got built or how important the Black-Scholes Model really is. Wayne Luthringshausen, chairman and CEO of OCC, told us how he and John Gelderman’s son Jeff built the CBOE’s first clearing system’s code, basically from scratch. And there is Dick DuFour of CBOE, who told us about the current CBOE building site – once owned by two competing railroads, and home of the old LaSalle Street Station where they filmed The Sting and screen legends like Clark Gable.

The leadership torch at CBOE will soon be passed to former John Lothian Newsletter guest editor Ed Tilly and Ed Provost (thus maintaining CBOE’s “Ed” lineage among C-level executives after Ed Joyce and Ed O’Connor). Those two men span an interesting historical timeframe at the CBOE as well. Ed Tilly started on the floor in 1985, rose to president and COO of the exchange and will take the CEO post. Ed Provost has been at the CBOE for 38 of its 40 years, and will become president of CBOE. This video started with a first draft of almost two hours, and now condenses 40 years into 26 minutes.

As a journalist in this space since 1996, I’ve had the opportunity to interview many executives who have set and changed the landscape in the futures industry in the US, Europe and abroad. Many of them share similar qualities of vision and determination, but also a focus and ability to see the next pitfall and opportunity. CBOE has had a rich history of those leaders with a lot to share and be proud of.

I invite you to watch the video we produced and hope you find the story as interesting as we did.

In advance of the FIA Boca 2013 conference next week, John Lothian News traveled to Washington D.C. this week to interview Walt Lukken, president and CEO of the Futures Industry Association to get his comments on the state of the futures industry today and what is in store for the rest of the year.

This two-part interview focuses on the key issues facing exchanges and brokers, as well as a rundown on the Dodd-Frank regulatory process. Watch both parts at MarketsWiki.tv.

Watch Part 1 of the interview:

FIA Boca Preview: Walt Lukken on the 2013 Outlook for the Futures Industry (Part 1)

Watch Part 2 of the interview:

FIA Boca Preview: Walt Lukken on the Impact of Regulation on the Futures Industry (Part 2)

When Phillip Futures Inc. started accepting U.S. business from an office at the Chicago Board of Trade building in 2012, the company expanded its reach, which had already included Singapore, Malaysia, Hong Kong, Japan, Indonesia, Thailand, the United Kingdom, Australia, France and China.

“To be a global player, we needed to be in the U.S,” says Lynette May-Tjuen Lim, CEO of the U.S. office. “The U.S. was the missing piece for us.”

Phillip Futures is a subsidiary of privately owned PhillipCapital, which was established in 1975 in Singapore as a stockbroking firm. PhillipCapital has since diversified to offer a suite of financial services including brokering of futures, foreign exchange, equities, fixed income, bonds, unit trusts, real estate and insurance.

We are now well past a year since MF Global‘s collapse seriously damaged the futures industry and now trekking toward six months since the Peregrine Financial Group went down in flames, taking more customer money with it.

Since November, after spending four months putting together solutions to those problems with our Restoring Customer Confidence video series, there’s been a small amount of industry action on what is arguably among the biggest threats to the futures industry’s growth – the lack of customer faith in the marketplace.

It’s been the era of the four “L’s” – low volume, low volatility, low interest rates and lots of regulation. That combination has been hit by the other L – lack of customer faith in these markets. What is sad and frustrating about the issue is that so little of it is talked about. Just one panel at the FIA Expo was devoted to it – “Moving Toward a New Customer Protection Regime.” And just days before the conference, NFA and AlphaMetrix announced a deal that will allow AlphaMetrix to provide the electronic confirmation system for the CME and NFA. A good start but since then, not much to discuss.

By Sarah Rudolph, Christine Nielsen and Jim Kharouf

Sometimes it’s the little things in a big deal that are interesting to note.

There is much to analyze in the IntercontinentalExchange‘s $8.2 billion purchase of NYSE Euronext – from OTC interest rates and credit default swaps to securities to futures. But with its acquisition of the New York Board of Trade (NYBOT) in 2007, ICE is now dominant in the global trading of soft commodities, as it acquired the lion’s share of the world’s sugar, coffee and cocoa derivatives trade.

While the likely increase in contract volume once the deal has closed is not staggering, the geographical reach is impressive.

By John Lothian & Jim Kharouf

As we head toward the end of a rather difficult year for most exchanges, we also appear to be headed toward the next round of consolidation in the industry. IntercontinentalExchange (ICE) has pulled off the once unthinkable – It has bought NYSE Euronext.

The deal, valued at $8.2 billion, is a blockbuster the industry hasn’t seen in a few years (LME-Hong Kong Exchanges notwithstanding), and it could launch the next round of consolidation in the industry. The futures and options markets have undergone dramatic and somewhat predictable changes in the past decade. The move from member-owned to publicly-owned exchanges opened the industry to flurry of M&A activity in the US and Europe. NYSE and Euronext. CME and the Chicago Board of Trade, and then New York Mercantile Exchange and most recently Kansas City’s bourse. ICE’s bought up London’s International Petroleum Exchange and then the New York Board of Trade, plus a little noticed but well-positioned Winnipeg Commodity Exchange. Nasdaq took on OMX, Nordpool and a PHLX. We’re likely missing a few, but you get the picture.

A Goliath merger between NYSE Euronext and Deutsche Boerse got the KO punch from regulators, as did the ICE-NASDAQ tag-team to buy up NYSE Euronext about a year ago. And now this.

In the wake of the MF Global and PFG scandals, many derivatives trading firms have been paring back their resources or “restructuring,” and volumes in equity options, among others, have come down. However, amid the bad news there are some underlying trends that bode well for the industry, according to Robert Fitzsimmons, CEO of the startup online futures broker Optionshop.

The firm is taking advantage of both the trend towards electronic trading of options on futures and the interest in commodities among retail investors. Optionshop is a Chicago-based firm founded by OptionsCity, a professional market making technology platform in the futures and equity options space, and Third Stone Partners, the private investment arm of futures trading firm Third Stone Capital. It plans to launch January 7 and will specialize in the execution of options on futures.

“The founders realized that retail investors and traders have had access to equity markets for years, but that in spite of the huge growth and electronification of the futures markets, there weren’t any systems out there designed to give professional quality tools to the retail participants who wanted to trade those products,” Fitzsimmons said. “So Third Stone and OptionsCity decided to devise their own system, and they approached me to spearhead the effort.”

Turnover on the NFA’s Board of Directors comes infrequently. I can’t remember a single instance where a non-Nominating Committee slated candidate succeeded in being elected until Ernest Jaffarian and Douglas Bry were elected last year. This year could be the same with two high profile write-in nominees on the ballot.

James Koutoulas and John Roe, the two co-founders of the Commodity Customer Coalition (“CCC”), are write-in candidates on the ballot for positions on the board of directors of the National Futures Association representing CTAs and CPOs. These two customer-focused media-savvy upstarts square off versus two representatives of the futures industry establishment, George E. Crapple of Millburn Ridgefield Corporation and Tom Lloyd of Campbell & Company, Inc.

Crapple has been on the NFA Board since 1996 and is a member of the Executive Committee. Lloyd is slated for a spot long occupied by Bruce Cleland, the former Campbell & Company, Inc. vice chairman who retired this fall. Cleland currently holds a position on the NFA Board, as well as on the NFA Executive Committee.

In the financial market, the trick is to find where a profit can be made, even when it appears there is no business to be found.

According to Larry Arnowitz, president of the newly formed Atrium Trading, while volumes are down on some products such as futures, there are other asset classes where volumes are increasing. There is also a pocket of the population that before Atrium came along, wasn’t being served. That is the higher-end active retail trader.

“We feel that people invest their money in mutual funds via investment advisors, trade their stocks and options through an online firm, and if they trade futures or FX they have a third account somewhere else,” Arnowitz says. “We are giving them the opportunity to combine all these asset classes into one account, cross margin, and trade from one platform.”