The main trend we’re observing is the increased demand for market data globally, particularly from international investors wanting access to US and European markets. In the third quarter of this year, Cboe saw 40% of our data sales coming from outside the US and we expect that to continue.  

This demand is being driven by global interest in the US market – investors want access to the outperformance of stocks like the ‘magnificent seven’ – as well as the expansion in retail trading across the globe. In Europe, we recently published our first retail survey with The Options Institute, Cboe’s education arm, and the results suggested a strong interest in exchange-traded equity options but that more education is needed. This could signal a shift of European retail investors from OTC leveraged products like CFDs to exchange-traded derivatives. Both trends are necessitating access to robust and reliable market data.  

Also, we’re seeing notable demand for our European equities data in Asia Pacific, as brokers look to offer a broader range of securities to their customers. Our strong market share in European equities and high levels of market quality makes our data attractive to these firms. 

What are some of the changes impacting how market participants are consuming market data, both in Europe and globally? 

As we look to enhance the distribution of our data globally, it is becoming even more apparent that customers want to consume data as seamlessly and efficiently as possible. One way to achieve that is by offering flexibility in the way customers access data. At Cboe we do that by making our own data available through various delivery mechanisms, including via cloud, helping to ensure lower infrastructure costs for those consuming it. Our North American, European and APAC equities data is available via the cloud, and we’ll be looking to bring on more content to meet the growing demand we’ve seen.  

The other change that will impact consumption in Europe is (finally) the introduction of a consolidated tape for equities. Incumbent European exchanges, through their operation of closing auctions and in the absence of a consolidated tape, enjoy a dominant position in the provision of market data to the institutional community. We believe the introduction of a real-time pre- and post-trade consolidated tape in both the EU and UK will be key to introducing a competitive dynamic in the provision of market data. It’s one of the reasons we launched SimpliCT in conjunction with Aquis Exchange to explore a bid for the CTP.  

Finally, there is also new regulatory technical standards from ESMA on what constitutes “reasonable commercial basis”, the principle by which market data is to be priced by EU exchanges. The final text came out this week and whilst the industry is still analysing what it may mean, it has the potential to change the market dynamic and licensing constructs we’re all familiar with today. All in all, 2025 will be an interesting year in Europe!  

What are some trends you expect to see in 2025 when it comes to market access? 

As with market data, customers are looking for better, globally consistent and more efficient services from their key providers when it comes to market access. Something that we have been really focused on is offering an enhanced access layer architecture for equities and options markets across the globe. 

Cboe has presence in 27 markets across five asset classes and all those markets now sit on one common technology platform (except our Canadian exchange, set to be migrated in 2025). One of the benefits of having a single technology platform is the efficiency and globally consistent experiences it allows us to offer. It creates an ability for us to launch something in one region and then easily replicate it in another. For example, ‘dedicated cores’ allows members and sponsored participants to host their specific logical order entry ports on their own CPU core(s), rather than sharing a core(s), which reduces latency, enhances throughput and improves performance through increased determinism. Dedicated cores is an optional service and Cboe will continue to offer shared access, as some customers will always want that service. 

We rolled this service out in US earlier this year and are now in the process of expanding it to Europe and Australia.  

What areas of the business is at the fore of Cboe Data Vantage’s priorities for 2025 and beyond?  

Cboe’s newly branded Data Vantage division better reflects the broad spectrum of services that were formerly part of our Data and Access Solutions business. Our priority is to continue to meet demand for data, access and analytical services through our three distinct pillars: risk and market analytics, Cboe global indices and market data and access services, along with the newly defined client experience arm, which will help our clients navigate the evolving landscape. 

We see Europe and APAC as key areas of growth for this business. Given that data is a precursor to trading, our focus is to leverage Cboe’s leading position in multiple asset classes around the world to export our data globally and import trading into our markets.  

There are lots of exciting projects on the horizon. One trend we’re leaning into is the desire of participants to consume more data and insights through cloud-based marketplaces rather than file-based delivery. As a result, Cboe offers a range of delivery methods for its historical and derived datasets and recently we made some of that data available within Snowflake to increase access to that data. We’re working with other vendors such as Google and AWS to do the same thing. 

Another significant trend we’ve seen in the US and has the potential to take off in Europe is the rise of defined outcome ETFs, an ETF with a derivative overlay with a defined upside whilst offering downside protection. Our Cboe Global Indices business has been a leader in this space and has developed the capabilities to deliver some interesting indices for our customers and issuers.

The post Fireside Friday with… Cboe’s Stephen Dorrian appeared first on The TRADE.

The product will be available beginning 2 December and exclusively listed and traded on Cboe Options Exchange.

The options will be SEC-regulated and based on the new Cboe Bitcoin US ETF Index.

“Our new suite of options on the Cboe Bitcoin US ETF Index offers a timely and compelling solution for traders to efficiently gain exposure to spot Bitcoin,” said Rob Hocking, global head of product innovation at Cboe.

“We expect the unique benefits of cash-settlement, combined with the availability of various index sizes and FLEX options, will give customers more flexibility in their trading strategies. Our index options offer a unique value proposition that we believe will appeal to both institutional participants and retail traders alike, who are looking to capitalise on or hedge against Bitcoin’s price movements without directly holding the asset.”

Options on the Cboe Bitcoin US ETF Index means that users gain exposure to spot Bitcoin ETFs – and indirectly to Bitcoin itself.

As well as cash settlement, these index options will offer European-style exercise, exercisable only on the expiration date and eliminating the risks of early assignment.

Cboe also plans to offer Cboe Mini Bitcoin US ETF Index options, as well as cash-settled FLEX options on both the Cboe Bitcoin US ETF Index and the Cboe Mini Bitcoin US ETF Index.

Adam Inzirillo, global head of data and access solutions at Cboe, said: “This latest initiative showcases the strength of Cboe’s exchange ecosystem – from listing and trading spot Bitcoin ETFs on our US equities exchange, to generating data that drives index creation, and now launching innovative tradable products like Cboe Bitcoin US ETF Index Options.

“Our ability to leverage the full breadth of our platform to continually bring new solutions to market is a key differentiator for Cboe and a major benefit to our customers.”

The post Cboe set to launch first cash-settled options product for spot Bitcoin appeared first on The TRADE.

Fredric Tomczyk

In particular, cash and spot markets were a key driver of the increased revenue, with significant improvement and net revenues up 15% year-on-year. Derivatives trends were also impressive, up 11% since the same time last year.

Fredric Tomczyk, Cboe Global Markets’ chief executive, said: “The second quarter results illustrate the durability of the Cboe business model […] I am incredibly pleased with the progress we continue to make as we work through our strategic review.

“Each component of our exchange ecosystem performed well during the second quarter, and we are well positioned for the second half of the year.”

Read more: Fireside Friday with… Cboe Global Markets’ Jon Weinberg 

When it came to options, the exchange posted a net revenue of $306.7 million, up $23.5 million – 8% – since Q2 2023. Notably, Cboe’s options exchanges had total market share of 31.2% in the quarter, compared to 33.3% a year ago, which the exchange put down to “a result of lower multi-list market share as compared to the second quarter of 2023”. 

Futures net revenue also increased, though to a lesser degree, with the area up $5.6 million year-on-year thanks to a reported increase in net transaction and clearing fees.

In addition, Cboe’s global FX record net revenue increased 11% for the same reasons. 

The exchange’s FX market share was 20.2% in Q2 2024, up from 19.5% a year ago. 

Read more: Cboe confirms plans for credit futures product expansion

Elsewhere, North American equities also increased  by 8%,  with a record net revenue of $98.3 million. This was also down to higher net transaction and clearing fees, as well as proprietary market data fees, and access and capacity fees.

“Net transaction and clearing fees increased by $7.0 million, or 25 percent, compared to the second quarter of 2023. The increase was driven by stronger US exchange and off-exchange net capture rates, as well as stronger volumes and market share in Canadian Equities as compared to the second quarter of 2023,” explained the exchange.

In April this year, Cboe announced the realignment of its digital asset business, confirming plans to transition digital asset derivatives trading and clearing into existing derivatives and clearing business lines. 

The move is dependent on a regulatory review, and has contributed to a winding down of trading on the Cboe Digital spot digital asset trading market.

Speaking to the future outlook, Jill Griebenow, Cboe Global Markets’ executive vice president and chief financial officer, asserted: “Moving forward, we anticipate organic total net revenue growth to finish in the 6-8% range, up from our prior guidance of the higher end of 5-7%. We are reaffirming our Data and Access Solutions organic net revenue growth range of 7-10%, but anticipate finishing at the lower end of the guidance range.

“Additionally, we are reaffirming our full year adjusted operating expense guidance range of $795 to $805 million. We have produced strong results for the first half of 2024 and look forward to delivering durable returns for shareholders in the quarters ahead.”

The post Cboe posts solid Q2 results with strong performances across derivatives and cash and spot markets appeared first on The TRADE.

Several European exchanges are well underway with plans to bring out offerings of this ilk in the next few months The TRADE understands, while a handful of US alternative trading systems (ATS) are also preparing to make the crossing over to the Bloc to replicate the progress they have achieved in the US.

However, in light of notably low volumes and high levels of existing fragmentation, Europe now finds herself as the belle of the ball – she’s in high demand but there’s limited room on her dance card.

Innovation is, of course, always welcome and a central solution to Europe’s somewhat stunted markets – when compared with others around the world. And these venues’ approach to workflows have been hailed by institutional investors as a more stable means for institutions to get execution and remove adverse selection outside of the existing periodic auction function that has already seen success in Europe.

It is rare, for example, that you’ll find an asset manager worrying about the good of the market or how an order might influence the primary lit market share, over whether or not they have achieved the optimal outcome for their portfolio manager and end investor.

But while these players each have a niche and positive offering to bring to Europe, there will likely not be room for all of these contenders to gain meaningful traction. The real question is who will achieve first mover advantage?

A Flathead vs Philips screwdriver

The US players eager to make their debut in the pan-European markets, each bring a slightly different spin to their approach to matching trades. Each have seen success in the US, and so one can see how a move to Europe feels like a logical next step. Many of them also have Tier 1 backing which could be leveraged to gain traction with European counterparts in the future.

Eric Stockland, co-head of global electronic trading at BMO Capital Markets, explains that the venues largely fall into two categories: “It’s like a Phillips screwdriver and a Flathead screwdriver. They’re built for slightly different purposes.”

Those taking a more micro periodic auction approach include OneChronos and IntelligentCross. When trading on these venues in the US, you trade everything you’ve got at a single point in time.

IntelligentCross uses artificial intelligence to run a periodic auction model instead of traditional matching engine technology. The ATS offers both dark and lit liquidity, using machine learning to optimise price discovery.

It claims to match orders “near continuously” to achieve optimal price stability. It added intraday optimisation earlier this month – effectively allowing its midpoint matching capabilities to adapt in response to market conditions during the live trading day.

“Investors should not have to choose between liquidity and performance,” Roman Ginis, founder and chief executive of Imperative Execution, tells The TRADE. “We are always looking for ways to deliver scale and yet still minimise adverse selection and market impact.”

Alternative ATS’ that favour a trajectory crossing model include LeveL ATS, of which Nasdaq took a minority stake in 2021, PureStream (powered by Nasdaq) and Morgan Stanley’s ATS TrajectoryCrossing. Using these systems, you trade either at a rate or an average which ranges in duration.

Read more – PureStream: The disruptor venue determined to make waves in the institutional liquidity landscape

“The trajectory cross models are really important for clients whose algorithms are benchmarked to an average price over time for example like a VWAP algorithm,” explains Stockland.

“If you need to get VWAP for 100 shares or for $10,000, it’s really hard to do because you can only do that in a couple of trades. If you think of a really actively traded stock you might only get to sample price two or three times. It’s very hard to get the average but if you agree a priority to trade at an average price over some period of time you can exactly get the average.”

While not all of these venues’ moves to Europe are confirmed, PureStream and IntelligentCross are rumoured to be exploring opportunities in the region, The TRADE understands.

“Subscribers and clients have both made it clear that the unique value of Streaming in the US is something that they would welcome in Europe,” PureStream chief operating officer Sean Hoover told the TRADE. “We are excited about our partnership with Nasdaq, who has publicly announced its intent to roll out our streaming order types in Europe later this year, subject to the necessary approvals.”

A spokesperson for IntelligentCross told The TRADE it was open to European opportunities in the future but declined to comment on timelines.

Others such as OneChronos are much further along and are in the process of gaining regulatory approvals to launch in Europe and the UK. The TRADE broke the news in January that former LSEG’s Scott Bradley had been appointed chief executive officer of OneChronos’ London office, effective immediately. Alongside him, former SIX’s Adam Sherlock was appointed chief executive of the European office and head of the firm’s new European Amsterdam based MTF, effective from 1 April.

Due to launch following regulatory approval in H1 2025, the US ATS proclaims to leave speed out of the equation unlike the price time priority of existing periodic auction models. Instead, it takes dollar price improvement as its priority function.

“We are taking time as a discrete function, which is what you do when you use a periodic auction rather than continuous mechanism,” explains Bradley. “We allow market participants and their clients to compete directly on price and quantity by removing speed as a factor in execution quality, levelling the playing field for all investors.”

The ATS runs auctions roughly 10-15 times per second and then uses series of order collection, data buffer, and optimisation models. Auctions run concurrently across the universe of securities as opposed to independently timed single security auctions.

On the basis of this model, the ATS is therefore set to add ‘expressive bidding’ otherwise known as contingent trading to its arsenal in the US in the coming months. However, expansion plans for Europe will be focused on its core optimisation model for the time being, pending regulatory approval.

“You’re not treating each security in a totally isolated manner. You could for example manage a pairs trade through a periodic auction because you’re actually trading those securities at the same time,” adds Bradley.

“That is functionality launching this year in the US and so will become something available in Europe over time, however we are not looking to run before we can walk. What we are initially looking to launch in Europe will be more akin to the model in the US as it is currently today.”

The American dream

These venues have achieved success in the US and each bring innovative industry solutions to the table, however, with expansion plans brewing, the challenge now lies in gaining meaningful traction in Europe when the pie itself is not growing. Europe is not the US and achieving a 1% market share here is not akin to achieving it there.

Europe’s venue landscape is already one of the most fragmented in the world. Meanwhile rhetoric from regulators, particularly in mainland Europe, continues to encourage a push for greater volumes taking place in the lit continuous markets.

We don’t have a consolidated tape – if this is news to you then see me at the end of class – and this means for the time being any new venue looking to launch in Europe will not benefit from CT revenues. This marks a stark difference from the US where every lit venue or exchange receives a portion of revenue thanks to the best execution rule.

The elephant in the room: budget. Nothing comes for free and in pan-European markets, no one is obliged to connect to any venue. Brokers – particularly smaller ones – are continuously facing the conundrum of how to leverage new and innovation solutions brought to market while managing their technology spend.

Some are more fortunate than others in this department but for those who are not, they will simply not have the capacity to build out to all of these venues, and if they do, they risk spreading themselves too thinly across a myriad of options.

With this in mind, many could therefore take the stance that they should hang back until one or a few clear winners rise above the rest and become a fast follower. However, if all take this stance, then nothing will gain meaningful-enough traction to survive.

There is of course the option for brokers to connect to technology and OMS providers who do this connecting work on their behalf. They take in the quotes and data feeds and brokers can simply send a conditional order and look at prices. But again, this relies on said technology provider putting up the cash to build out to any or all of these new venues.

European exchanges

Enter Aquis and Cboe. While many European institutional investors are looking to the US for this much-desired trajectory crossing and upgraded periodic technology, there are developments rumoured to be taking place closer to home.

According to a source familiar with the matter, Aquis is rumoured to be launching a new TWAP and VWAP trajectory crossing capability towards the end of this year. Aquis declined to comment on the launch. Meanwhile, Cboe is also rumoured to have a crossing launch in the pipeline.

“The benefit that we have with new services is our long track record of success with orderbook innovation, and closely partnering with clients during the development process,” Natan Tiefenbrun, president of North American and European equities at Cboe, tells The TRADE.

“We deliver new services that clients want, on time and we make it as easy as possible from a technology perspective for these services to be adopted. We have built up a strong level of trust and support from clients which is a real source of competitive advantage to us when it comes to new product launches.”

When asked to comment on any new services in the pipeline, Cboe declined to comment.

While these offerings will not be a carbon copy of what the US ATS’ intend to bring over, one can see the appeal of leveraging an existing connection with an exchange partner to access said technology instead of having to fork out for new ones.

With all of these players now vying for the attention of institutional investors, it is likely that the early bird will catch the worm and some newer players may struggle to make inroads. Players such as OneChronos are expected to arrive in Europe in 2025 but with European players preparing to throw their hat into the ring before that, we could see a chunk of flow hoovered up before their boots touch the ground.

Cboe’s periodic auction is the beneficiary of said tactics and now dominates the market in Europe. April was an all-time record for Cboe’s periodic auctions across both average daily volume at just over £2.1 billion and market share which accounted for 6.3% of total continuous trading in European equities.

“Undeniably there’s an advantage to being first but that advantage is not insurmountable,” says Stockland. “The folks could come in and quote that slightly novel improved twist on the workflow. Workflow really matters in this business. It could come in and compete better on price.”

“It’s a big advantage to going first but I don’t think it will thwart others and it doesn’t preclude them from ultimately overtaking and becoming number one. Look at Cboe, they were upstart ATS 15/20 years ago and they dominate pan-European trading today.”

Private rooms

An interesting element of the US players is their capabilities with ‘private’ or ‘hosted’ rooms and whether or not this could be translated into their potential future European workflow. In the US, the use of private rooms – a not too distant cousin of Europe’s former Broker Crossing Networks (BCNs) – is prevalent amongst institutional players.

The option is available to participants who do not have the budget or technological or regulatory capability to run a venue but that are looking to interact with select number of firms. IntelligentCross runs this functionality and OneChronos is about to launch it in the US, The TRADE understands.

OneChronos’ offering is called Nexus and allows clients to create bespoke periodic auctions to trade with a select number of counterparties.

Fragmented liquidity has become a hot topic in European discussions and sparked some heated on-stage debate at recent conferences. BCNs were scrapped as part of Mifid II in order to make markets more compliant and push more volumes onto lit continuous markets.

However, increasingly bilateral and fragmented forms of interaction are becoming more popular in Europe despite rhetoric around the damaging impact they have on the primary markets. It’s an interesting one to watch, especially considering the potential for any venues that operate using this model to move over to Europe.

“There may be certain features which may be able to find their way into the European landscape,” says Bradley. 

“If you think about the trading that happens within SIs currently, there’s clearly an appetite for certain forms of bilateral execution but a straight translation from ATS private room into MTF would not meet regulatory requirements as is. What it does suggest is that there is an appetite to think about new dynamics of counterparty interaction.”

The landscape of periodic auction and trajectory crossing networks in Europe is set to flourish over the coming remainder of the year. Despite Europe’s volumes being low, these venues offer greater choice and competition for institutional investors looking to achieve optimal outcomes which could in itself go some way to boosting stats in Europe. While not all will be successful, some definitely will. In this instance, it’s likely the one that takes top spot will be the one that gets there first. Innovation will prevail.

The post Early bird catches the worm: A look at the race for first mover advantage in Europe’s emerging crossing network landscape appeared first on The TRADE.

Despite the indisputable decline in physical trading practices, it is enduring within an increasingly technological capital markets world which has already put innumerable out-dated practices out of fashion. Market opinion – and moves – suggest that mourning the

Like the return of old Nokia’s and ‘dumbphones’ in the era of the smartphone, a hungering for print in the age of digital, and the comeback of the polaroid camera and vinyl, perhaps there’s just reason why these concepts were once deemed great.

Following the announcement from MIAX last October about plans to launch a new US options electronic exchange and physical trading floor, The TRADE wanted to delve into why open outcry has persisted and the potential for a quiet resurgence of the dying practice. 

Charles Dolan, former executive floor governor at the NYSE, and current COO of Green Impact Exchange (GIX), tells The TRADE that in his experience the human element of trading is a critical component in times of stress, remaining valuable despite technological advancement.

“In the past there were 5,000 people who worked on the floor of the New York Stock Exchange and now there’s probably 300. We couldn’t continue to do what we were doing manually in an electronic world. That being said, human judgement is critical in terms of taking control of situations that get out of hand. That’s the overarching thought process as to why [physical trading floors] are important.” 

The value placed on the face-to-face auction system, though indisputably less than in times gone by, is proven by its prevailing presence, with MIAX just the latest to invest in the practice. 

Once approved, MIAX’s new options venue, named MIAX Sapphire, will open a physical trading floor in Miami in H2 2024, with plans to commence electronic trading operations next quarter, pending regulatory approval from the SEC.

At the time, Shelly Brown, executive vice president, strategic planning and business development, Miami International Holdings, explained that the new exchange, combined with a live trading floor, is set to be particularly effective in the trading of those larger, more complex orders.

Echoing this notion, Anthony Montesano, head of derivatives market structure at Cboe, tells The TRADE that in his experience it is the larger, more complex orders that are routed to the floor, as more sophisticated, orders often want – and benefit from – a little bit more high touch versus the very simple order flow.

He explains: “If somebody’s entering a huge notional-sized order into the marketplace, they might not want to put that on-screen. If the order is routed through a floor broker, they can source liquidity, manage the order and get true price discovery.

“When you look on-screen, the size and price you see in the screens isn’t necessarily the full market, it’s what the market makers are comfortable quoting electronically. There’s often much, much more liquidity behind those on-screen prices. When brokers are facing off with a whole crowd full of highly capitalised traders, they can work the order a bit better, control the execution and have more effective price discovery.”

Read more: Farewell open outcry

Speaking to The TRADE, Daniel Labovitz, former head of regulatory policy at the NYSE and current chief executive of GIX agrees, suggesting that though the market has been focused on commoditising trading faster and cheaper, there is a potential for this to affect the quality of execution, in particular when trading is atomised and one is trying to move a large position.

He further asserts that there is something to be said for a bespoke approach to trading: “It’s the reason that people like to make their own lattes instead of getting it out of a machine, because it tastes better if you can get exactly what you want.”

Strength in diversity, amid volatility

There is the undeniable importance of human presence in times of increased volatility – well documented across the industry. As Graham Sorrell, managing director and head of EMEA and APAC equity, currency and derivatives trading at State Street Global Advisors, previously put it, we are a long way from the stage where the only role of the human is to feed the dog that keeps the human from touching the machine.

With the increasing prevalence of macro-economic divergences, human intervention across the lifecycle of trading remains an important element as even highly developed systems continue to demonstrate gaps when detecting disruptions.

“Human involvement in the kind of market-making that takes place there is important because of those instances when things get out of control. You need the ability for people to react and to hit the brakes and slow things down for a second,” says Dolan, adding: “Now, they’re monitoring everything that’s going on with electronics. So that if something happens, it can be sorted off floor. However, I think that there’s still a reason that the NYC has found value in having those folks down on the floor doing what they do.” 

Taking the flash crash of 2010 as an example, Labovitz highlights how the circumstances around how the events unfolded demonstrated a key difference between NASDAQ and NYSE listed stocks – where electronically traded NASDAQ stocks tended to drop faster and farther than the NYSE listed stocks, with the difference being human intervention.

“A computer goes with a stimulus-response – you poke it, and it does something – with the flash crash, it was the humans on the floor thinking, ‘there has to be a glitch somewhere,’ and responding, while the computers were just repeatedly stub quoting. So it kept trading down, down, down, whereas the human brain with all the context says, ‘This doesn’t seem right’ or ‘I think there’s more to this story’. There’s an intelligence and an advantage to being on the floor […] There is a value to the aggregation of people in a place to trade, it creates better markets.”

Sharing his own first-hand experience of crashes whilst working for the NYSE, Dolan recalls: “I’ll never forget it because I was across the road in our office, talking to our CEO and the market was down 300 points and by the time I walked across the street and got onto the floor, the market was down 800 points. That was about five minutes. So, what was interesting was that you weren’t quite sure what was happening, what was going on, what was causing this and over the next 15 minutes, the market dropped down to 1,200 points. 

“We reacted – we stood there as market makers and bought when nobody else wanted to buy, and kind of put ourselves in harm’s way to facilitate the market and help the stocks gravitate to a point where the public wanted to trade again.”

Read more: Lessons learned from Flash Boys

The overarching benefit therefore of this reactive component and demonstrably valuable aspect of open outcry – human oversight – is the tangible means of diversification. Speaking to The TRADE, Sylvain Thieullent, chief executive at Horizon Software, explains: “In terms of open outcry as a strategy, it would be counter-intuitive to see it come back full-steam to what it looked like back in the 80s for example, but for best execution it’s useful to have multiple tools and choices available and maybe then use the right one for a specific trade.

“For example, for what we call market sentiment, there is nothing better than open outcry to detect what the sentiment of the market is, so it does make sense that in some specific market conditions specifically the value is clear.”

This perspective on the value-add of live trading floors is in stark contrast with CME Group’s decision to completely shutter the open outcry practice across its exchanges back in 2021. 

The group confirmed on 5 May 2021 it would not re-open the open outcry trading pits following their closure in March 2020 during the COVID-19 pandemic, while contrastingly, Cboe opened a new trading floor in June 2022, having also closed due to COVID-19 related reasons in March 2020.

The exchange at the time highlighted client demand for additional floor-based traders as the driving factor behind the decision.

“COVID-19 required us to configure the trading floor to allow for six feet of separation between traders. Our previous floor couldn’t accommodate everyone on that basis.  So, on June 6 2022, when we opened our brand-new shiny state-of-the-art trading floor, it was really well received. It has a very attractive and efficient design which appeals to traders,” Montesano tells The TRADE. 

He added that based on what the company is seeing currently in terms of real data, the future looks bright in the space. Cboe’s proprietary product suite set several volume records in 2023, including SPX ADV of approximately 2,900,000 and VIX ADV of 743,000, with around 23% and 45% of those volumes taking place on the floor, respectively, The TRADE understands.

It was back in December 2022 that Cboe further expanded its floor having previously asserted that physical trading would remain open “as long as investors wanted them”. 

Montesano reaffirmed this to The TRADE: “Cboe will continue to operate a trading floor as long as our customers find utility in that, and in the hybrid market model we have. So far, that is the case. We do run a very robust trading floor, along with the fully electronic market, because our customers are telling us they still find tremendous utility in having the floor […] Our busiest open outcry pit is our S&P 500 options pit, the SPX pit and we now have more Market-Makers in that pit than we did prior to COVID-19.”

Market colour

Linked to the ability to account for anomalies through a physical, human presence, is the so-called ‘colour’ added by outcry trading and the ability to witness and perceive market sentiment first hand.

Dolan asserts that the tone and feeling of the floor was a key aspect: “I could tell when there were certain news items throughout my career down on the floor because there was a sense, a buzz in the air indicating it. For example, if the inflation number was a little bit lower and the market’s ripping upward because everybody thinks the Fed’s going to pause on interest rates, it’s a dynamic feeling.

“You could sense either the downside and the fear of what was going on in bad situations, or the euphoria on the upside when the floor got louder and busier. That was the fun part of the floor because you could sense that something was happening.”

Empirically, this equates to brokers providing this colour to their clients, informing customers in real-time what they are perceiving, and importantly, proactively looking out for these indicators.

As Montesano explains: “Another factor in going via the floor is that brokers can provide market colour and inform their customers in real-time what else they see going on in the pit. For example, they can make their customers aware of other large orders being executed in related or opposing series. That perceived colour is a value add. 

“We know of several brand-new firms, including some from overseas, and some that can quote electronically but also wanted a floor presence because they saw the vibrancy of it. In addition, some of the existing firms that have had a pit presence have expanded their presence. We’ve even had more brokerage groups come into the business as well.”

Read more: First ever female traders share experiences of the London trading floor

Elsewhere, speaking to the prevalence of open outcry in the US compared to Europe, there is a marked difference in approaches. While there remains today several open outcry exchanges on one side of the Atlantic, The London Metal Exchange (LME) is the last remaining in Europe. 

Thieullent suggests that it was a question of different recipes for different cultures: “[…] These days there is definitely a question around liquidity in Europe, where re-emergence of open outcry being a viable solution for more liquidity is more of a question. It’s a tool which has been lost in some ways in European culture, and there is a real challenge with regard to the number of liquidity pools and the overall liquidity of the market available which makes the potential slice for open outcry very small or very irregular.” 

However, on the other side of this is potential for evolution and enough space in the market to consider alternatives: “Obviously people agree that without e-trading, the market could have never survived the COVID-19 pandemic, if it was all physical trading. All that is absolutely true. But in the same breath, everyone was completely convinced that remote working was the future – completely – but then two years later we’re back and the office is once again valued. The winds have changed direction which is interesting,” says Thieullent.

Though electronic trading accounts – understandably and irrevocably – for the bulk of the market’s activity, this aspect of trading life, which does still prevail, is therefore perhaps not merely a nostalgic hark back as many are quick to declare. Rather, open outcry can justly be considered an extra, valuable, facet of an ever-moving and complex industry.

As Labovitz suggests: “Trading floors represent a different way of doing things, not worse, not an inferior way. A different way of doing it – there’s value in that.”

The post Open outcry: A renaissance? appeared first on The TRADE.

Coming in at number four in The TRADE’s most read stories for 2023 was news in September that Cboe Global Markets’ chief executive officer Edward Tilly had resigned over undisclosed personal relationships.

Tilly resigned from the company following the conclusion of an investigation into his conduct, launched in late August 2023. The investigation, which was led by the board of directors and an independent counsel, concluded that Tilly did not disclose personal relationships with colleagues, violating the company’s standards and values.

“Cboe strives to uphold the highest ethical standards across the organisation, and fully investigates and takes appropriate action when it determines that any of its policies have been violated,” said William Farrow III – newly appointed non-executive chair of the board of directors.

Appointed to replace him was a member of its board of directors, Fredric J Tomczyk, who assumed the role with immediate effect. Tomcyzyk assumed the role of chief executive officer after four years on Cboe’s board. Previously in his career, he served as president and chief executive of TD Ameritrade Holding Corporation for eight years and as vice chairman of TD Bank Financial Group. Prior to joining TD, he was president and chief executive of London Life and London Insurance Group.

3. SEC issues ruling for a new National Market System

Many of our most read stories over the last 12 months have unsurprisingly had a regulatory focus, given the number of changes taking place across the globe. While much of industry regulatory discussion over the past few years has been centred around the Mifid overhaul in Europe, with certain aspects such as transparency playing the role of poster child for post-Brexit divergence, our readers in 2023 have been more interested in what is happening in the US.

Coming in at number three in our most read stories was news in September that the US’ Securities and Exchange Commission (SEC) had issued a ruling for a new National Market System. Central to the announcement was a filing of a new national market system plan (NMS plan) by the watchdog, specifically directing FINRA and 18 SROs associated with Cboe, Nasdaq, and NYSE to act jointly in developing the NMS plan.

Incumbent exchange groups in the US, which include the aforementioned venues, have historically held total control and voting rights related to the production and dissemination of data. This has led to an ongoing debate by market participants, with many arguing that venues hold an unfair monopoly on the critical market data and creates a conflict of interest.

The SEC subsequently ordered exchanges to submit new plans for governance of market data in May 2020, in a bid to overhaul control over the equity consolidated tape and address conflicts of interest concerns. September’s announcement marked the filing of a new NMS plan “to replace the three existing national market system plans which govern the public dissemination of real-time, consolidated equity market data for national market system stocks”.

The results are set to be published for public comment next year, and according to the SEC, the revised plan must: include a date by which it will become fully effective, alongside a prescribed timeline and periodic progress reports; require that all those involved be subject to the plan’s conflicts-of-interest and confidentiality policies; include specialised provisions regarding the sharing of protected information; and outline rules regarding the use of subcommittees.

2. Perpetual merges regional asset management businesses under one global umbrella

At number two in our most read stories series, we have the announcement that Perpetual Group had merged its regional assets management businesses to form one global division in August. Among the asset management bands that were merged were Perpetual, Pendal, Barrow Hanley, J O Hambro, Regnan, Trillium and TSW. The Group said the move will help it to reap the benefits of a “global multi-boutique model” as well as a global distribution team in asset management.

Rob Adams took on the dual role of chief executive of Perpetual Group and chief executive, asset management. Two further roles were created to support Adams within the asset management leadership team.

“The changes we are making enable us to have an improved focus on our global asset management business and successful execution of strategy, while creating a simplified Perpetual Group leadership structure focused on driving future growth across all our businesses,” said Adams.

Graham Kitchen, who had served as chairman of Trillium and Perpetual corporate entities in the UK, will serve as global head of investment strategy while a search for a permanent candidate commences. Elsewhere, Clare Forster was appointed as global head of business management and strategic delivery. Regional chief executive roles for Europe and UK (EUKA), and the Americas were also impacted by the development. Alexandra Altinger, chief executive of asset management, EUKA (including J O Hambro) subsequently left at the end of August.

1. Majority of prop trading firms obliged to join FINRA under expanded SEC rule

And finally, we reach the crescendo of The TRADE’s most read stories for 2023. Coming in at number one with over 70,000 views was news in August that the US Securities and Exchange Commission (SEC) had moved to expand the remit of national securities associations such as the Financial Industry Regulatory Authority (FINRA) to cover previously exempt proprietary trading firms.

Once again with a regulatory focus at its epicentre, the story unpacked the move by the watchdog and what it would mean for certain types of participants. As the industry’s product universe grows but headcount shrinks, more and more firms are relying on publications such as The TRADE and market structure specialists to explain key regulatory developments.  

The SEC’s August decision to increase the number of broker dealer firms registering with FINRA came as the Commission aims to promote fair, orderly, and more efficient markets. The SEC under Gary Gensler has been overhauling many market areas throughout the course of this year, some of which haven’t seen an update to their regulations in decades.

“Today [23 August], many broker-dealers conduct significant cross-exchange or off-exchange activity,” said Gensler in an August statement. “Yet, some of today’s broker-dealers continue to rely on an exemption from national securities association registration that’s older than the cell phone era. This has led to a regulatory gap whereby a number of firms that have cross-market, monthly trading volume valued in the hundreds of billions of dollars are exempt from national securities association oversight.”

The decision is set to contribute to greater transparency – in particular for off exchange activity – and strengthened oversight in the treasury markets due in large part to the fact that FINRA requires members report post-trade activity in markets.

The post The TRADE’s most read stories of the year part three: Regulation, consolidation and resignation appeared first on The TRADE.

This new role expands on his previous position as president of Cboe Europe, now also overseeing North American cash equities. This took effect as part of broader leadership changes announced by Cboe in October, which included Adam Inzirillo, previous head of North American equities being appointed the new global head of data and access solutions.

Additionally, New York-based Oliver Sung has been named head of North American equities in his stead, reporting into Tiefenbrun. He was previously head of the North American execution consulting team.

Tiefenbrun has held various roles across the industry, including leading the agency equities trading services across EMEA at Bank of America Merril Lynch before moving to Cboe in 2021 as head of European equities.

Read more: Fireside Friday… with Cboe Europe’s Natan Tiefenbrun

He was also previously chief executive of Turquoise, and before that as head of products, equity and derivative markets at the London Stock Exchange (LSEG). 

Tiefenbrun also spent 13 years at agency broker Instinet developing the firm’s algo trading portfolio trading and sponsored access business.

The post Cboe’s Natan Tiefenbrun takes on newly expanded role as president of North American and European equities appeared first on The TRADE.

The annual Leaders i

The post-trade landscape is constantly evolving, bolstered by technological advancements and regulatory change – particularly in light of Basel 4 and the ongoing Brexit deliberations in the UK and Europe.

With its complete view of the market, The TRADE has named Cboe Clear Europe, Eurex, Euronext Clearing and LSEG’s LCH as the most impressive players in this space thanks to their recent achievements and developments.

Cboe Clear Europe 

Cboe rebranded its clearing house EuroCCP to Cboe Clear Europe late last year, having acquired it two years prior. Since then, the post-trade offering has seen various developments as it continues  to enhance its services, focused on growing its European markets, embracing innovation and supporting its clients’ strategies. The pan-European central counterparty (CCP) has approval to clear cash equities, depositary receipts, ETFs, and equity derivatives (index futures and options). Claiming to be one of the most-connected CCPs in Europe, it offers its services to 48 trading venues, with plans to continue to grow this further. Its overall market share for cash equities clearing was 34% in the first half of 2023, an year-on-year increase from 2022.

In January, Amsterdam-based Cboe Clear Europe became the first non-UK CCP to receive permanent recognition from the Bank of England (BoE). Subsequently, Swiss authorities also authorised Cboe Clear Europe as a recognised CCP in March. Following this, in June, Cboe Clear Europe unveiled an initiative to introduce clearing, settlement and post-trade lifecycle management for SFT transactions in European cash equities and ETFs by Q3 2024. Subject to regulatory approvals, the service will come through its Amsterdam-based clearing house and introduce matching, CCP clearing, settlement and post-trade lifecycle management for SFT transactions in European cash equities and ETFs, and settlement will take place in 19 European Central Securities Depositories (CSDs). The move secured the support of a broad range of key market participants, including banks, clearing firms, asset managers and custodians, including the likes of BNY Mellon, Citi and Goldman Sachs.

Cboe Clear Europe is an independent subsidiary of the Cboe group, operating with its own governance structure and management team – bolstered through the appointment of Vikesh Patel as President in December 2022. He replaced Cécile Nagel, who stepped down from the role in September.

Eurex

Eurex, part of Deutsche Börse Group, has made many high-profile developments over the last year, working to grow its post-trade offering through partnerships and launches. In November last year, it launched a new incentive program aimed at encouraging more euro clearing volumes to the European Union post-Brexit. Through offering an incentive reward of up to 50,000 euros, could qualify when starting the clearing of OTC interest rate swaps (IRS), overnight index swaps (OIS), basis swaps and/or zero-coupon inflation swaps (ZCIS) at Eurex Clearing. Clients running active accounts in the EU could apply from March of this year with the clearinghouse confirming that the move was aimed at reducing reliance on CCPs outside of the EU in line with regulatory objectives. The same month, it expanded its interest rate segment with the launch of three-month Euro STR futures referencing €STR, allowing allow Eurex to offer a listed, centrally cleared and cash-settled solution for trading or hedging the new risk-free rate.

Eurex’s offering allows clients to trade repos with more than 160 registered participants and allows participants to raise or place cash against over 13,000 securities, both domestic and international. The business reached record volumes in its cleared repo markets – doubling across all markets year on year as of September this year. Eurex onboarded State Street in May of this year, becoming the first clearing house outside of the US to trade and centrally clear repo transactions with the move allowing State Street clients to benefit from multilateral netting providing risk management and collateral optimisation. Following this, BNY Mellon selected Eurex as the first clearing house to centrally clear repo trades in Europe. The same month, Goldman Sachs joined exchange Eurex’s listed FX futures business as a trading and clearing member – a “major milestone” in its ambition to become a listed FX liquidity hub in Europe.

In April, Eurex Clearing announced the planned launch its new ESG Clearing Compass, aiming to support the sustainable transformation journey of clearing members and their clients by increasing transparency and awareness regarding cleared portfolios and counterparties. More recently, in June, Eurex incorporated STIR derivatives into its partnership programme, with the aim of establishing an EU-based viable alternative liquidity pool for trading and clearing EURIBOR Futures and Options. Eurex at the time stated that its goal is to “enhance its cross-product efficiencies while also supporting the European systemic stability and strategic autonomy agenda”.

Euronext Clearing

Multi-asset clearing house, Euronext Clearing – formerly CC&G as part of Borsa Italiana – offers risk management on 14 markets and seven countries, covering equities, ETFs, closed-end funds, financial and commodity derivatives, bonds and repos. The year to date represented a key stage of the business’ growth strategy, working to deliver one CCP for all of Euronext’s cash equity, financial and commodity derivatives markets across Europe. The clearing migrations for equities and derivatives clearing are scheduled respectively for end of 2023 and Q3 2024, set to provide harmonised trading, clearing and settlement infrastructure for its members. In January of this year, the exchange negotiated the early termination of its derivatives clearing agreement with LSEG clearing house LCH SA.

In June 2022, Euronext and LCH RepoClear concurrently launched Value at Risk (VaR) methodologies across the respective debt markets they clear, across fixed income, equity and equity derivatives. Euronext’s VaR-based margin methodology focuses on Italian, Portuguese, Spanish, and Irish government bonds. The move comes as part of the ongoing evolution of Euronext Clearing Risk Management systems and will replace the MVP SPAN-like margin methodology which is currently applied to all bond instruments. The new VaR framework on equity and derivatives, expected this quarter, is part of the European expansion of Euronext Clearing and the firm’s “Growth for Impact 2024” strategic plan. Upon the completion of the migration programme, Euronext Clearing claims to be be Europe’s third-largest CCP.

Over the last three years, Euronext has made continued investment in its clearing business, with 50 new hires as it worked towards its target of 65% headcount growth of Euronext Clearing between 2021 and 2023. The hires have been made across its risk, technology, sales and product development functions. In May, Euronext appointed Roberto Pecora as chief executive officer and general manager of Euronext Clearing, effective from July.

LCH

LCH – an LSEG post-trade business – has seen a swathe of new developments over recent months as it continues to enhance its business on a global scale. It offers its clearing service and risk management offering across a range of asset classes, including: OTC and listed interest rates, fixed income, FX, CDS, equities and commodities. In the last year, LCH has seen significant growth across its services, including  LCH CDSClear which saw a 31% increase versus H1 2022, LCH SwapClear – up 13%; LCH RepoClear with an increase of 12% year on year, and LCH CommodityClear which saw a 9% increase.

The business has been enhanced through various acquisitions and partnerships. In April, LCH entered into a strategic partnership with digital assets trading venue, GFO-X, to launch the UK’s first centrally cleared trading venue for derivatives in this space – scheduled to launch in Q4. Additionally, last year’s acquisition of portfolio optimisation services provider Quantile added important multi-lateral netting capabilities to LSEG’s post-trade division, working to maximise efficiency and better manage risk, capital and funding requirements through Quantile’s multilateral optimisation services. Following this, the completion of the Acadia acquisition in March 2023 further enhanced the offering across multiple asset classes, with Acadia providing risk management, margining and collateral services for the uncleared derivatives markets. Another key milestone came in July, as LCH merged its RepoClear Euro debt service, which includes specials and general collateral, with its tri-party basket repo clearing service €GCPlus, unlocking additional netting opportunities for members.

Most recently, in October , UOB (United Overseas Bank) joined both LCH SwapClear and LCH ForexClear as a direct clearing member, the first Southeast Asian bank to join ForexClear, the last Singapore local banking group to join SwapClear, and the first member globally to join both simultaneously. Earlier in the year Barclays, Barclays Ireland and Goldman became clearing brokers at LCH’s CDSClear, demonstrating the continuing growth of the business, while Standard Chartered and IndusInd Bank partnered to clear its first NDF non-deliverable forward (NDF) client transaction at LCH ForexClear. In August, Corentine Poilvet-Clédière was appointed chief executive of Paris-based European central counterparty LCH SA, assuming the role on 1 October, replacing Christophe Hémon.

The post Leaders in Trading 2023: Meet the nominees for… Outstanding Post-Trade Services Provider appeared first on The TRADE.

Following regulatory approvals, the available products are set to be expanded by the end of Q1 2024, and plans are in place to begin Cboe’s Liquidity Provider Programme for all equity options after the March 2024 expiry period. 

The single stock options traded on CEDX will be cleared by Cboe Clear Europe N.V. In addition, stock settlement on options exercise and assignment will take place in domestic Central Securities Depositories, “removing unnecessary costs and allowing for settlement netting with relevant cash equities transactions,” according to the business.
 
Several firms have confirmed their support of CEDX’s expansion into equity options, including: ABN AMRO Clearing, All Options, Barak Market Making B.V, Goldman Sachs, Morgan Stanley, Susquehanna International Securities, and Interactive Brokers.

Interactive Brokers is set to become a direct trading participant on CEDX, as well as a direct clearing participant for equity derivatives on Cboe Clear Europe N.V.

Iouri Saroukhanov, head of European derivatives at Cboe Europe highlighted the importance of support from users: “We are delighted to have secured the support of such a strong group of participants to support the launch of single stock options on CEDX. Their support demonstrates the need for a more efficient options marketplace in Europe as envisioned by CEDX, which is designed from a pan-European point-of-view, increases competition and lowers barriers to entry for institutional and retail investors.

“CEDX will offer first class levels of efficiencies to options participants from a trading and clearing perspective, including margin efficiencies and domestic stock settlement on options exercise, to help grow options markets in Europe,” he added.

Cboe launched its equity derivatives exchange CEDX in September 2021, with the aim of bringing competition and innovation to the region’s equity index futures and options markets.

Initially, the offering was based on key Cboe Europe single country and pan-European indices, with clearing provided by Cboe Clear Europe. N.V.
 
From 6 November, CEDX plans to make single stock products available for trading with options offered on 133 companies across 12 European countries: Belgium, Denmark, Finland, France, Germany, Italy, the Netherlands, Norway, Spain, Sweden, Switzerland and the UK.

According to the business, these products amount to 70% of current ADV and open interest for the top 600 European equity options.

Speaking to the news, Jerome Bedouet, head of derivatives distribution EMEA at Morgan Stanley, said: “We look forward to partnering with CEDX on their expansion into equity options allowing our clients the benefit of greater liquidity and more choice.”

The post Cboe to offer single stock options from next month after backing from major participants appeared first on The TRADE.

The results are set to be published for public comment, and according to the SEC, the revised plan must: include a date by which it will become fully effective, alongside a prescribed timeline and periodic progress reports; require that all those involved be subject to the plan’s conflicts-of-interest and confidentiality policies; include specialised provisions regarding the sharing of protected information; and outline rules regarding the use of subcommittees.

The US Securities and Exchange Commission (SEC) ordered exchanges to submit new plans for governance of market data back in May 2020, in a bid to overhaul control over the equity consolidated tape and address conflicts of interest concerns.

The regulator at the time directed equity exchanges and the Financial Industry Regulatory Authority (FINRA) to propose a National Market System plan, to produce the public consolidated tape and disseminate the data.

Speaking at the time, Jay Clayton, chair of the SEC, stated: “Today’s action reflects careful analysis and deliberation on modernising and improving access to equity market data and, as a result, our equity market structure more generally.

“Today’s Commission action is based on extensive input from a broad range of investors and market participants and reflects the commitment of the women and men of the SEC to fairness in our markets and the interests of investors.” 

They have now moved forward, and last Friday ordered the filing of a new NMS plan “to replace the three existing national market system plans which govern the public dissemination of real-time, consolidated equity market data for national market system stocks”. 

Read more: What is Reg NMS and could it be beneficial for Europe?

Under the current regime, exchange groups which include Nasdaq, NYSE and Cboe, hold total control and voting rights related to the production and dissemination of data– which has over time led market participants to believe that venues hold an unfair monopoly on the critical market data.

The conflict of interest specifically stems from the entities’ interest in maximising the viability of the data products they sell, and their regulatory responsibilities in overseeing the NMS plans.

Speaking in the most recent announcement from 1 September, the SEC explained: “Developments in technology and changes in the equity markets have heightened the inherent conflicts of interest […] This has raised concerns about whether the existing NMS plans for equity market data continue to fulfil their regulatory purpose to ensure the availability of information with respect to quotations for and transactions in securities. 

“Today’s order addresses conflicts of interest inherent in the current governance structure of the existing equity data plans and is designed to improve the efficiency of NMS plan operations and the responsiveness of the plan to the concerns of market participants that are not self-regulatory organisations.”

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