ANALYSIS: Cboe to focus on events, digital and crypto - CEO

Speaking as Cboe presented third quarter results on Friday, chief executive Craig Donohue said the firm was looking to focus on expanding the digital asset franchise and creating a prediction market opportunity to maximise growth.

“I want to make sure that we are focussed on event and prediction markets, digital and crypto markets, there is extraordinary growth there,” Donohue said on a call with analysts. “I think they align well with our core capabilities in terms of what we have been able to achieve with the retail segment – those are largely at this point retail-oriented product opportunities.

“I would like to think that we have been an innovator in shorter-dated contracts through zero-day-to-expiry (0DTE) options and event/prediction is really just coming at it from a different way, but that is something that we have demonstrable expertise and success in.”

Prashant Bhatia, who joined Cboe as head of enterprise strategy and corporate development in September, said the Chicago-based exchange group was finalising the fine details of the prediction offering.

“We see broad-based interest in prediction markets. We think it aligns well with a cross-section of secular trends – increased retail participation, the appetite for short-dated options, smaller contract sizes…,” Bhatia said in answer to an analyst question. “So we want to leverage our strengths and provide industry participants with a neutral infrastructure platform, and we are thinking both on the exchange and clearing side.

“We think there is an opportunity there, you can expect our focus will be on financial and economic related contracts when it comes to those products and we are crafting a go-to-market plan and we will provide you with updates there as we make progress.”

The move comes after rival CME Group published details of the first wave of event contracts it will list later this year through a partnership with gaming platform FanDuel first announced in August.

Cboe has seen record levels of activity in its index options market this year, hitting a quarterly average daily volume record 4.9 million contracts in the third quarter, according to exchange data, 15% higher than the same period in 2024.

Of that total, 3.9 million S&P 500 index options (SPX) traded a day, including 2.4 million 0DTE contracts. It is that liquidity that will give Cboe an edge in the increasingly competitive event landscape according to Donohue.

“Specifically, when I think of the liquidity providing community, and really the tangential nature of the event and prediction market, we are excited to work with those core partners and tap into the vast amount of liquidity that they provide each and every day,” he added. “To put that in perspective, an average of about $18 billion (£13.7bn) in premium trades each day in SPX options. In the prediction market year-to-date in similar products is less than $50 million in premium.

“So if we do this correctly, we are really bringing these liquidity pools to that event and prediction space which gives us a real unique opportunity to enter it and grow.”

The exchange on Thursday announced that it has hired retail market veteran JJ Kinahan from IG to spearhead the retail effort. Kinahan will take up a newly created role as head of retail expansion and alternative investment products.

The US group also pledged to reduce costs at Cboe Europe Derivatives, the Amsterdam-based venue launched in 2021, and sell its Australian and Canadian cash equities platforms as it completes a multi-year review of businesses.

“Essentially what I’ve been focussed on, and the team has been focussed on is trying to pivot people toward the largest growth opportunities that we have among all the available choices,” Donohue told analysts.

“Obviously, we feel like we have done a very good job in Australia and Canada, but at the same time our best opportunities for growth are in our current large core businesses that are hugely successful where we have got a critical mass of successful markets, products, liquidity and customers.”