Welcome to The Spread, I’m Matt Raebel.
The pandemic has been a catalyst for change. Some of those changes have been good, some bad, some a bit of both, and for some, it’s too early to tell. As for the CME Group, it’s the end of an era. The company announced this week that it intends to keep almost all of its old-school open outcry trading pits closed indefinitely. The only exception is its Eurodollar options pit, which will continue to be traded via both open outcry and electronically. Options can be tricky to trade electronically and Eurodollar options volumes have been high. Besides, those pits were reopened last August,so it seems like the CME was like, “let’s not mess with that.”
The CME also announced it would de-list all S&P 500 futures and options contracts following their expiration on September 17, pending regulatory review. After that, remaining open interest from those contracts will be migrated into E-mini S&P 500 futures and options on CME Globex. Unlike when Taco Bell removed half the items from their menu because of the pandemic, I don’t think this change is going to get reversed anytime soon. Although it’s a sad day for traditional pit traders, many are taking heart from having been a major part of trading history.
Speaking of electronic trading, the trading fervor earlier this year yielded a big payout for Robinhood. The brokerage app, which makes most of its dosh from payment for order flow, made about a third of a billion dollars in Q1 alone – that’s over three and a half times what they made in Q1 of 2020. Bet they won’t have any more problems running out of capital for a while.
Cboe shouldn’t run into that problem either, according to its quarterly profit report. VIX futures and options volumes rose 63 and 29 percent, respectively, and Cboe’s total revenue increased by 10 percent.
Cboe also announced that they’re working on yet another new product this week: ESG derivatives. Quite frankly, I’m just shocked it took this long.
Ed Tilly, chairman, president, chief executive, and archmagi of Cboe Global Markets announced this during the company’s earnings call late last week. Tilly said that the exchange group is interested in the space, calling it, “a big deal for us.” John Deters, chief strategy officer for Cboe, said the company is working with its partners at FTSE Russell, MSCI and S&P to figure out some kind of ESG product for future release.
And finally, don’t tell Satoshi, but Ethereum options appear to be trading at higher volumes than bitcoin options on the crypto derivatives exchange Deribit for the first time ever. The total trade volume for bitcoin options was almost 880 million dollars on Monday, while the total trade volume for ether options was 1 point 32 billion. Ether is becoming a popular choice for a lot of reasons, but the bottom line is that Ethereum’s value has gained by over 1,400 percent since the beginning of the year, compared to bitcoin’s 550 percent. But knowing the crypto markets, this time next week they could both be overtaken by Dogecoin. Stranger things have happened in the past year.
If you’re bummed about the CME’s trading pits closing – or maybe you’re feeling a little nostalgic – you can check out our newest edition of Path To Electronic Trading featuring the CME’s former CIO Jim Krause. Check that out at John Lothian News dot com and follow us on Twitter, LinkedIn, and Facebook for updates on news and new content published by JLN. That’s gonna do it for The Spread this week, so until next time, stay safe and happy trading.
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CME Group to Close Most of Its Chicago Trading Pits Permanently
Alexander Osipovich – WSJ
Chicago Says Goodbye to CME’s Last Commodity Trading Pits
Isis Almeida and Kim Chipman – Bloomberg
Robinhood’s Biggest Business More Than Tripled Amid Trading Frenzy
Peter Rudegeair – WSJ
Cboe profit beats estimates amid robust trading volumes
John Mccrank and Sohini Podder – Reuters
Ether options trading volume surpassed that of bitcoin’s for the first time on Deribit
Yogita Khatri – The Block
Cboe To Enter ESG Space
Shanny Basar – MarketsMedia
Jim Krause: The Path To Electronic Trading
John Lothian – JLN