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Definition: CBOE


Quick Summary of CBOE

The CBOE, or Chicago Board Options Exchange, was founded in 1973 as an exchange devoted entirely to trading options contracts. The growth of the CBOT has paralleled the increasing volume of options trading generally. In the earliest days, the only options contracts traded on the CBOE were on individual stocks. Then Black-Scholes was adopted and the SEC asked the CBOE to stop expanding the number of contracts traded in the booming options market until the stock option itself passed review. In the early 1980s, the CBOE introduced options on stock indices, such as the S&P 500. When the stock market crashed in 1987, interest in options declined, so the CBOE diversified into interest rate options. In June 2003, the CBOE introduced a hybrid trading system that combines features of screen-based and open-outcry trading. Today, the CBOE offers options on several hundred different assets, and CBOE volume averages well over one million contracts traded each day.

Full Definition of CBOE

Established in 1973 by the Chicago Board of Trade, the Chicago Board Options Exchange (NASDAQ: CBOE) is the largest options exchange in the USA. Located at 400 South LaSalle Street in Chicago, CBOE offers for trade options on more than 2,200 companies, 140 Exchange Traded Funds (ETFs) and 22 stock indices. In 2007, the number of trades was in the range of one billion options contracts.

The Chicago Board Options Exchange started its operation on 26th April 1973 and was the first-ever to offer standardized stock options for trade in an exchange. Like other exchanges in the USA, the CBOE is regulated by the SEC (Securities and Exchange Commission).

CBOE Operations

The market capitalization of the global derivatives market, futures, options, swaps, according to a Wall Street Journal estimate, was in the range of $450 trillion in April 2007. The market capitalization of US stock exchanges totals approximately 30 trillion, while stock exchanges worldwide total roughly 20 trillion. The global fixed income market totals approximately 65 trillion.

Clearing the options contracts of CBOE is the responsibility of the Options Clearing Corporation (OCC). Trading in volatility and variance contracts was started on the CBOE Futures Exchange in 2004. In 2007, it launched the CBOE Stock Exchange (CBSX), a Reg NMS compliant stock exchange with the intention of providing competition to NASDAQ, NYSE and other exchanges.

The CBOE uses a dual system that allows traders to choose between the electronic system and the traditional open cry system. A vast majority of trades (95%) accounting for 60% of traded volumes are placed and executed electronically. The difference is due to the fact that the trades carried out on the open outcry system are typically large, complex institutional orders. The open outcry system is advantageous in the sense that floor brokers can use their skills to negotiate and get a better price.

CBOE filed the necessary paperwork for its initial public offering on March 11, 2010.

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Definition Sources

Definitions for CBOE are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 15th April, 2020 | 0 Views.