Cboe Europe Derivatives Q2 Update

Iouri Saroukhanov
July 3, 2024

As we enter the second half of the year, I wanted to provide a brief update on CEDX's progress: I'm delighted to report that we have already reached several important milestones in 2024 - and during the last quarter in particular - and are excited about the progress still to be made during the rest of the year.

Here's a few Q2 highlights:

  • Equity Options: We witnessed the first equity options volumes on CEDX at the start of the June and they really took off during the month, with a total of 13,989 lots traded. From a total of 322 contracts listed, 201 distinct options have traded.
  • Index Derivatives: Index futures price quality has seen further improvement with spreads tightening following the introduction of a new Liquidity Provision Programme. That, in turn, helped to improve book quality of the index options.
  • Participant Updates: In May, Interactive Brokers successfully connected to CEDX as a direct trading and clearing participant. By June, it was offering its vast client base access to the full suite of CEDX Pan-European equity derivatives. We also welcomed IMC, a leading global liquidity provider, as a trading participant and expect them to start quoting during Q3.
  • Liquidity Provider Programmes: At the start of the quarter, we rolled out a new Liquidity Provider Programme (LPP) for Equity and Index options to ensure consistency and tightness of spreads in our order books (here). At the same time, we revamped the LPP for index futures (here).
  • Retail Education: In co-ordination with The Options Institute (OI), Cboe's educational arm, we have kicked off an educational plan for European retail investors. The OI has had great success in the US, educating retail investors on options and how they can become more sophisticated users of these products. This is something we want to replicate in Europe and as a first step we are undertaking research to understand the types of investors who trade options and how educational programmes might be best delivered to them.

Chart 1 – CEDX Total Monthly Volumes Since Launch

Equity Options

I want to delve a little deeper into the equity options volumes we saw in June. Total volume during the month was 13,989 lots, with a peak daily volume of 1,871 on June 24 (see chart 2). Open interest also peaked at over 8,700 on June 27.

Chart 2 - CEDX Daily and Aggregate Equity Options Volumes, June 2024

The top five options traded during the month, by volume, were TUI, Airbus, Lufthansa, ING and Bayer (see chart 3).

 Chart 3 - Treemap of CEDX Equity Options Volumes by Underlying, June 2024

Across the month, 201 equity options traded from a total of 322, covering 11 out of a possible 14 countries. We were also the first exchange to list equity options on Galderma Pharmaceuticals (GALDO) on June 24, in response to client demand.

These are solid foundations on which we are excited to offer a simpler, lower cost, pan-European approach to trading European options, lowering barriers to entry for institutional and retail investors.

Furthermore, through our pan-European clearing house Cboe Clear Europe, we believe we bring significant enhancements to the post-trade treatment of equity options, alongside cash equities and index futures and options, thereby contributing to the growth of the overall market. Cboe Clear offers margin efficiencies between CEDX’s pan-European index and single-stock products, and provides domestic settlement on options exercise and assignment.

Participant Update

I want to save my last word to reflect on the recent additions to our participant base. Interactive Brokers joined as a direct trading and clearing participant in May of this year, and is offering its clients access to CEDX’s full range of products. This was a significant milestone on our journey to improve the ability of retail investors to gain access to and benefit from European derivatives. We are now in active conversations with many of their professional clients to better educate them on our products, with a particular focus on options in general.

A couple of weeks ago, we also announced another pivotal development, with IMC, a leading global market maker, joining CEDX. They are set to start quoting later this month and will bring additional breadth to our existing range of top tier liquidity providers, as well as much-welcome depth to our order books.

The support of firms with the calibre and pedigree of Interactive Brokers and IMC demonstrates the broad appeal of CEDX’s business model and provides strong alignment from the industry’s key players on our vision to create a larger, more competitive and more efficient European derivatives marketplace.