(Bloomberg) -- Cboe Global Markets Inc. is aiming to grow too large for potential acquirers to swallow up.

After years of speculation about takeover possibilities, the exchange operator’s new chief executive officer says it’s unlikely a suitor will make an offer that works.

“We’re 100% focused on making it very expensive if anybody wants to acquire us, and we’d be very suspect of what would actually get done,” Fredric Tomczyk said in his first media interview since taking over in September. “If you walk through the logic, it’s not obvious to us that anybody would be allowed or able to do it.”

In addition to rejecting talk that his firm might be a target, the 68-year-old CEO said he’s slowing the pace of Cboe’s own acquisitions, focusing more on organic growth. 

“That’s not to say there won’t be M&A, but it will be few and far between,” said Tomczyk, who stepped in when his predecessor, Ed Tilly, abruptly left after failing to disclose personal relationships with colleagues. Any purchases will be “more deliberate and strategic,” Tomczyk said. 

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Tilly’s departure sparked speculation about the company’s future, with some market participants raising the possibility that a suitor would swoop in and capitalize on the disruption. A deal with rival exchange CME Group Inc. has long been discussed in the industry as logical. It would unite two powerhouses of trading in Chicago and beyond, and put CME’s S&P 500 futures and Cboe’s S&P 500 options — wildly popular products that are exclusive to their exchanges — under one roof.

The highly concentrated and competitive exchange industry in the US has also fueled speculation that Cboe could be acquired by a European competitor. 

“In today’s world, as you look at what’s going on geopolitically, it’s not obvious to me that anybody from a foreign country is going to be allowed to buy Cboe,” Tomczyk said, adding that no other companies have approached him with an offer. “My job is to continue to grow this organization. And if someone approaches us, Cboe is no more and no less for sale than it was two years ago.”

The company’s share price has risen 56% in the past two years, boosting its market value to about $20 billion. 

‘Integration Fatigue’

Cboe, formerly known as the Chicago Board Options Exchange, has a history of growing through dealmaking. It evolved from its early days as a Chicago trading pit to an electronic platform by buying companies in Europe, Asia and North America. Among the largest was its $3.4 billion acquisition of Bats Global Markets in 2017, which gave Cboe new technology and put it on the map as an exchange operator, not just in derivatives but in equities as well.

Over the years, the company has transformed itself from a small options exchange into a global powerhouse offering a range of products, including zero-day options and the fear index known as VIX. Other acquisitions include Aequitas Innovations, the parent of Toronto-based NEO Exchange, and cryptocurrency company Eris Digital Holdings, which added crypto as a new asset class. 

“Ultimately I want us to get back to being that organic-growth company,” Tomczyk said from the firm’s office in New York’s financial district. “The organization clearly has a bit of integration fatigue after a lot of heavy lifting.” 

Executive Turnover

Tomczyk, who was given a one-year contract when he took over in September, said the board’s decision came together quickly without much negotiation. He had previous experience in the top job, including at TD Ameritrade, where he spent eight years as CEO. He was also vice chairman of TD Bank Financial Group. The executive was also no stranger to Cboe’s business, having served on the board since 2019.

“We’ve had a fair bit of turnover at the top, so part of my job was to come in and stabilize the organization in a tumultuous period. And I think we’ve done that,” he said. Now he’s focused on developing talent and rebuilding the team. “When we think succession is ready, I’ll go back to being a director.”

In the interim, the firm continues to reap the benefit of explosive growth in options trading. Total US options volumes hit a record annual high of 11.1 billion in 2023, more than 7% higher than the 10.3 billion contracts traded in 2022 and marking the fourth consecutive year of record-breaking volume, according to Cboe data. 

That growth is due, in part, to trading in short-dated US index options. The zero-day options products that Cboe expanded to every day of the week have lured investors at a time of growing unease, allowing them to hedge market reactions to jobs reports, gross domestic product numbers and more. Offering more days for expiration allows traders to get in and out of positions more quickly. It has also increased Cboe’s volume and data. 

Tomczyk said his team remains focused on innovating and offering new products based on investors’ feedback.

“We’re at an inflection point,” the CEO said, “where you consolidate, look at where we’re at, and start investing in organic growth initiatives to build off the platform that we’ve built and integrated.”

--With assistance from Isis Almeida.

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