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Cboe Betting U.S.-Style Equity Derivatives Trade, Clearing Translates to Europe

Suzanne Cosgrove

Suzanne Cosgrove

Acting Managing Editor

Cboe Global Markets executives on Thursday touted its European clearinghouse acquisition, announced July 1, saying the exchange holding company aims to unlock the potential of pan-European derivatives business.

In a call with investors and analysts, Edward Tilly, Cboe president and CEO, said the deal with EuroCCP marked “a major milestone“ for the company. “Ownership of a leading European clearinghouse not only enhances Cboe’s European equity business, but also provides opportunity to diversify our business into trading and clearing derivatives,” Tilly said.

Cboe plans to launch Cboe Europe Derivatives, an Amsterdam-based futures and options market, by the first half of 2021, subject to regulatory approval. It initially plans to offer trading in equity futures and options based on six Cboe Europe indexes: The Cboe Eurozone 50, Cboe UK 100, Cboe Netherlands 25, Cboe Switzerland 20, Cboe Germany 30 and Cboe France 40.

“We’ve designed our markets from a pan-European point of view,” said David Howson, president of Cboe Europe. “The EU clearinghouse completes the missing piece of the puzzle.”

“The real difference here is a new market structure is being introduced,” Howson said. With derivatives trading and clearing available from a single access point, Cboe’s pan-European market “will offer efficiencies not currently available in today’s segmented market,” he said.

While the U.S. trading of equity derivatives has grown rapidly in recent years, European exchange trade has stagnated. A lack of transparency and competition and a reliance on block trading has upended the growth of European equity derivatives, Howson said.

Currently, Eurex is the top derivatives exchange in Europe, offering investors a variety of equity derivatives on global benchmarks, as well as the heavily traded Euro STOXX 50 index futures and options.

‘We are not simply trying to take market share from existing exchanges, but rather our aim is to grow the overall derivatives market pie in Europe,” Howson said. A transparent, lit, quote-driven market will bring a diverse range of market participants, opportunity and growth, he said.

Asked about EuroCCP acquisition costs, Brian Schell, executive vice president, CFO and treasurer at Cboe, affirmed that the acquisition would reduce Cboe’s earnings per share by about 8 to 10 cents in 2020 and 2021, with the likely impact closer to the high end of that range.       

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