ANALYSIS: Cboe sees increasing interest in European derivatives

Speaking to FOW after attending the International Futures Industry Conference in Boca Raton, Florida last week, the Chicago exchange’s global head of derivatives said last year’s boom in demand for US equity derivatives has now been supplemented by increasing interest in European exposure.

“While there is still demand across the globe to have access back into the US market, there was some indication at FIA Boca that maybe we have hit peak American exceptionalism, and there were definitely more questions from clients about Europe during meetings,” Catherine Clay (pictured) said in an interview.

“That was a notable shift, with European derivatives a key topic of interest.”

Cboe Europe Derivatives (CEDX), the Amsterdam-based derivatives exchange launched in 2021, traded in January 11,640 lots, which was up 112% on the same month last year, according to FOW Data. Last year, the European market traded 105,095 contracts which was an increase of 123% compared to 2023, according to FOW Data.

CEDX, which was already supported by options markets-makers Susquehanna and Morgan Stanley, added in May Interactive Brokers and Dutch market-maker IMC in June, which helped boost trading activity.

“From the perspective of our US clients, what we offer here in Europe looks and smells like their operations in the US,” Clay said. “That is what we uniquely bring here with our European derivatives exchange. From the market structure perspective, the idea was to create a pan-European market with a single user experience that reduces complexity and cost. We are seeing that interest continue to build, which is helped by the current market environment.”

Cboe's educational arm - The Options Institute - is supporting CEDX in running a comprehensive education campaign, which was announced in November following a survey of retail participants. This has included local language campaigns in Russian and Spanish this year ahead of Dutch and German programmes later this year.

Cboe’s US option product suite has seen volumes rocket across its S&P 500 index (SPX), volatility index (VIX) and Russell 2000 options.

The exchange group, which competes in US options with Intercontinental Exchange, Nasdaq and Miami International Holdings, reported record 2024 revenue of $2.1bn (£1.6bn), up 8% on 2023, driven by a fifth consecutive record year for US options trading.

At the end of last week, SPX average daily volume was 4.11 million contracts, beating February’s full month record of 3.49 million lots.

“In the midst of policy uncertainty and unpredictability, there is a need for much more diligence in terms of portfolio management, but that also means more opportunities to take advantage of,” Clay said. “So, when it comes to our unique SPX and VIX ecosystem, which is representative of risk transfer and exposure to the US capital markets, we are seeing a rush to hedge and take positions around that.”

In the US, retail brokers have reacted to a loosening of regulatory policy around event contracts by expanding their coverage. Retail giant Robinhood this week announced an event contract hub for traders, and Webull last month announced a partnership with Kalshi to roll-out binary event contracts. For Clay, the renewed interest could present an opportunity for Cboe.

“This is a very interesting market to us, and we are watching it very closely to see where we can provide utility in that space,” Clay added. “Alongside the growing interest and volumes, there is a debate going on right now about which instruments are appropriate to put alongside serious investment tools and products for brokers to make available to clients.

“As a trusted and regulated exchange, with a clearing house, there may be an opportunity for us but we want to be sensitive to what is good for the industry as a whole. There is no reason for us to rush in, but we certainly want to be a part of that conversation because we think we have something to offer this asset class as it emerges.”