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Crypto loses an ally after Cboe chief Tilly steps down

Crypto loses an ally after Cboe chief Tilly steps down
Cboe has a new CEO, the exchange has been positive on crypto and recently filed Fidelity's Bitcoin ETF application. Credit: Piotr Swat/Shuttershock.
  • Cboe said Edward Tilly left the exchange after he failed to disclose “personal relationships with colleagues.”
  • Cboe has been positive on crypto and filed several spot Bitcoin ETF applications this year, including Fidelity’s.
  • The long-time chief was replaced by board member Fredric Tomczyk.

Happy Hump Day!

Crypto-friendly exchange head Edward Tilly resigned from his role as chief executive of the Chicago Board Options Exchange on Tuesday.

The long-time CEO failed to disclose personal relationships with colleagues, an investigation found. Tilly had approached crypto in an open-minded manner.

Here’s why his resignation matters:

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The state of play

Edward Tilly was forced to resign on Tuesday after an internal probe revealed undisclosed “personal relationships with colleagues.”

The former chief’s failure to disclose personal relationships with colleagues “violated Cboe’s policies and stands in stark contract to the company’s values,” the firm said in a statement.

Tilly spent just over a decade at the helm of the world’s largest options exchange, where he worked since 1987. His tenure as CEO covered 20% of the firm’s entire history. During this time the Cboe was involved in several crypto projects — including the purchase of crypto exchange ErisX for nearly half a billion dollars in 2021.

“Together we can not only meet the growing demand for institutional and retail trading solutions but also push the boundaries of digital asset innovation and unlock its next phase of growth,” Tilly said at the time of the acquisition.

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The exchange’s purchase of ErisX came at the top of the crypto market in 2021, when Bitcoin was trading around $60,000. Cboe has since written down its $460 million purchase.

More recently the Cboe filed several spot Bitcoin exchange-traded fund applications, including one on behalf of Boston-based asset manager Fidelity. The exchange chose to add Coinbase to these applications as a part of a surveillance-sharing agreement with the crypto exchange.

Coinbase shares popped following the announcement by the traditional finance mainstay.

Tilly was positive when it came to spot Bitcoin ETFs gaining approval, he told Bloomberg TV in August that his firm were “optimistic that the SEC will get comfort around their ability to survey, hopefully with a trusted market operator.”

“There is a demand for the democratisation of crypto exposure, and ETF’s are a wonderful tool,” Tilly said.

The crypto industry has now lost this ally. Tilly was replaced effective immediately by Cboe board member and former TD Ameritrade CEO Fredric Tomczyk.

Tomczyk has spoken positively about retail investors, although his views on crypto are uncertain. The playing field has never been more level between retail and institutional investors, he told CNBC in 2021.

Joe Moglia, the former CEO of TD Ameritrade and college football coach, who Tomczyk took over from in 2008, has been positive on Bitcoin ETFs. He backed the approval of a spot Bitcoin ETF last month, saying, “it’s better for the institutional and individual investor.”

Its unclear if Tomczyk will take a similar approach to crypto as his two predecessors.

The news has lifted Cboe shares, with reports citing renewed speculation that the Cboe could be set to merge with its well known neighbour, the Chicago Mercantile Exchange.

CME Group previously moved to quash rumours that it was looking to acquire the Cboe in August 2021. The firm did not immediately respond to a request for comment.

While the CME does offer futures and options contracts in Bitcoin and Ethereum, its appetite beyond this is unclear. CEO Terry Duffy approaches crypto in a very conservative way, he told Crain’s Chicago Business following the collapse of FTX last year. There needs to be a use case for all products, he said.

“For crypto there needs to be a time where the use case starts to prove out. I haven’t seen that yet,” he said at the time.We’re very cautious. There needs to be a use case; otherwise, it’s just a pure speculative contract, and that’s not what we want to have.”

Crypto market movers

  • Bitcoin slipped 0.5% over the past day, as it trades around $27,000. The leading cryptocurrency by market capitalisation is still up 3.5% over the last seven days.
  • The US Federal Reserve’s latest interest rate decision today could spark volatility in crypto markets. Keep an eye out for the policymakers’ rate outlook, which could leave room for another hike.
  • Ethereum dropped 1.5% towards $1,600.
  • Altcoins had been trading higher throughout the week but have now reversed this trend. Cardano’s ADA and Binance-affiliated BNB dropped 1.6% and 1.2%, respectively.

What we’re reading

Adam Morgan McCarthy is DL News’ London-based Markets Correspondent. Got a tip? Reach out at adam@dlnews.com.