Few leaders of publicly traded companies in Chicago have been more ensconced in the role of chief executive than William Brodsky.
After 16 years at the helm of the Chicago Board Options Exchange and nearly 40 years in the exchange industry here and in New York, Brodsky announced Wednesday that he will be stepping down as CEO of CBOE effective in May.
The transition will be longer. Brodsky, 68, will then become executive chairman, with his longtime heir apparent, Chief Operating Officer Edward Tilly, taking over as CEO. Brodsky will remain in the executive chairman's role for at least one year, according to a transcript of a Wednesday conference call with analysts and reporters.
Very few executives — Christie Hefner and Bob Galvin are two exceptions — lasted that long in recent decades. Consider that when Brodsky first joined the Chicago Mercantile Exchange, or Merc, in 1982, the computer operation was treated as another small department, run, he later told journalist Bob Tamarkin, like the mailroom.
"He lived through the 1987 stock crash, the dot-com collapse of 2000 and the eventual meltdown in 2008," said Leo Melamed, who helped recruit Brodsky to the Merc from the New York-based American Stock Exchange, where he was vice president.
"But I speak from experience that the roughest of all years in our business was 2008, and he managed not only to survive but strengthen CBOE. It's the No. 1 options exchange in the world. ... Bill had a real large hand in bringing (Chicago) to the center of finance."
Brodsky's career has been chronicled on the fringes of several books whose storylines are dominated by market gyrations and power struggles. Most accounts emphasize Brodsky's skills as an administrator, the perfect "Mr. Inside." That's also what the Merc needed at the time, amid internal strife and conflict and growing competition with Wall Street.
Upon his arrival as executive vice president and chief operating officer at the Merc, he undertook a massive restructuring, which took nearly a year and resulted in all five senior vice presidents reporting directly to him. After the 1987 stock market crash, he worked to institute coordinated circuit breakers across exchanges that would slow or stop trading during a market free-fall.
Brodsky rose to president of the Merc, leaving to run CBOE in 1996. The exchange, the first for equity derivatives in the United States, was founded in 1973.
"When you are CEO of an exchange, I always describe it as like driving a high-powered race car," said Tom Donovan, the former CEO of the Chicago Board of Trade. "You have to have both hands on the wheel at all times. You have to watch and run the exchange on a daily basis, working with members every single day. But you also have to be able to work outside and be a good representative in Washington and a good representative with the media."
Brodsky's decision to hand over the CEO job comes at a challenging time for CBOE, as competition for options trading is exploding while volumes have declined. CBOE also is under SEC investigation for possible lapses in its self-regulation duties.
A spokeswoman said Brodsky, who typically hosts reporters at an annual lunch in Chicago and is frequently in Washington where exchange regulators sit, was unavailable for this story.
Under his leadership at CBOE, he oversaw several major milestones. There was a delayed but nonetheless successful 2010 initial public offering, marking the last major U.S. exchange to do away with the membership model. And there was the invention of the CBOE volatility index, or VIX.
"The VIX is the most important one," Melamed said. "I think that has become a national and international bellwether contract for determining the risks that we live with in the securities world. It's just a great weather vane in the business. It's really the hallmark of the CBOE."
Although the VIX may be the most innovative move, it was the IPO that set in motion Wednesday's announcement.
"Getting to the IPO was an important milestone for our company, and I was committed to seeing it through," Brodsky said on the conference call Wednesday. "Once there, I felt that I owed it to the company to begin activating our succession plan."
Given his long tenure, the major development that hasn't happened under Brodsky's watch is the often-speculated sale of CBOE in an era of relentless consolidation.
Reuters contributed.
Melissa Harris can be reached at mmharris@tribune.com or 312-222-4582. Twitter @chiconfidential.
