ANALYSIS: Cboe to launch options education push after survey

Cboe Europe Derivatives (CEDX) and The Options Institute – Cboe’s education arm – on Tuesday published the results of its survey of European retail investors. The exercise was launched in May last year, as the firm was finalising the addition of its first retail broker.

The survey found that 62% of existing derivatives retail users are interested in equity options, and 61% would like an advanced course to learn more about deploying strategies. Of the top use cases, 47% said they would deploy the contracts for capital protection, followed by 35% for hedging and a third for risk reversal positioning, according to Cboe.

“Cboe has witnessed firsthand the growing influence of retail investors, especially in US options, and these survey results demonstrate European markets are on the cusp of transformation by this community if the significant demand that exists for exchange-traded options can be effectively unlocked,” Iouri Saroukhanov (pictured), head of European derivatives at Cboe Europe said in a statement.

CEDX in May added Interactive Brokers for direct trading and clearing, and in June went live with Dutch market maker IMC. The exchange is also backed by market-makers Susquehanna, Barak Capital Market Making, Flow Traders, Morgan Stanley, and Tower Trading Group, according to its website.

The expansion led to a boost in volumes in June and July, which hit consecutive records of 17,016 contracts and 18,975 lots in the two months. That was up from 1,662 lots and 2,457 contracts in June and July 2023, according to FOW data. Most recently, the European equity exchange reported 7,794 contracts trading in October, which was 35% higher year-on-year, according to FOW data.

The move comes alongside a debate on a fresh round of European markets regulation aimed at reinvigorating the region’s Capital Markets Union program, which has been stalled since being drafted a decade ago. Trade bodies have called for more liquid secondary markets in instruments including derivatives to support the ambitions of the package, as well as support to further develop regional adoption.

“CEDX has been striving to lower traditional barriers to entry by creating a more efficient, simpler, and lower cost pan-European derivatives exchange,” Saroukhanov added. “However, more needs to be done to cultivate an investing culture among European retail investors and provide the necessary resources for them to start trading.”

The Cboe survey also found two thirds of participants who were interest in derivatives but do not currently use them (prospects) said they would need more basic financial education before engaging. In addition, 64% of those firms said they would like more dependable resources on the topic.

The Options Institute will add on-line courses, on-demand materials and an options knowledge centre for European investors starting next year. The institute will also add Dutch and German resources to existing English and Spanish programming in early 2025, it said.

“Access to meaningful and digestible education has played a pivotal role in the growth of options adoption in the US, particularly among retail investors,” said Alexandra Szakats, head of The Options Institute at Cboe. “This survey demonstrates a tremendous opportunity for similar growth in European markets with Cboe being well-positioned to provide a wide set of educational resources that allow retail investors to make more informed decisions.”

Speaking to FOW last month, Cboe’s global head of derivatives said the firm would redouble efforts to replicate the US adoption of options in other regions, including Europe. The exchange group last month confirmed it will soon complete connectivity for retail giant Robinhood to its index options product suite in the US.

“The Options Institute is excited to expand into Europe, building upon decades of worthwhile educational efforts through an array of content and resources,” Szakats added. “The insights for the survey and subsequent focus group discussions will inform our planned activities in the European market, helping retail investors better understand options and the utility they can provide to their portfolios.”

The survey was conducted with 5,058 retail traders across France, Germany, the Netherlands, Spain and the United Kingdom this summer, Cboe said.

Speaking to journalists at an event in London this month, the chief executive of rival Eurex Frankfurt said retail demand in Europe would benefit from product development and improved education.