Empowering Investors Through Expanded Global Access to Derivatives

How has the volatility trading landscape evolved over time and what are the trends you’ve seen this year?  

As we move through 2024, one theme is clear: the need for robust risk management tools has never been greater, with both institutional and retail participants, domestic and international, increasingly turning to options.  The trends we have observed this year reflect the changing landscape in how, and by whom, options are being used.  

A new generation of sophisticated retail investors is joining traditional participants in using options to position for an uncertain market environment – a trend that emerged during the pandemic and shows no signs of abating.  

Investors are trading options across a range of durations, both short- and long-dated options, to tailor their exposures and manage positions with more granularity and precision. Additionally, a rise in the listing of innovative product types, such as FLEX options and defined-outcome ETFs that incorporate options-based strategies, are enabling investors to harness the utility of options through a simple, efficient and exchange-listed wrapper.   

Amid global macroeconomic uncertainty and ongoing geopolitical tensions, the demand for hedging extends far beyond just US investors. We are seeing heightened engagement from investors in Europe and Asia Pacific, who are increasingly seeking exposure to the US equities markets – as well as ways to hedge that exposure. Evidencing that, volumes in our SPX options and VIX options and futures continue to grow in both the US-hours trading session and Global Trading Hours (GTH) session, driven by participation from a global customer base.  

The US options market today is more vibrant, liquid and robust than ever. Cboe will continue to play a central role in shaping the market’s growth and provide our customers with access to the tools and solutions they need. 

Cboe has announced plans for several new products in recent months. What is driving Cboe’s approach to product innovation and expansion of its offerings?  

At its core, Cboe’s mission is to expand the accessibility and utility of our risk-management toolkit, and our volatility suite of products, in particular. Our proprietary product suite has served investors well and as investor needs for hedging, trading, diversification and asset allocation continue to evolve, we are committed to expanding our product suite.  Cboe Labs, our product development and innovation arm, plays a critical role in engaging with our customers and index partners for ongoing feedback and the sharing of ideas that ultimately shape our product innovation roadmap.  

To that end, we are excited to bring several new products to market this year, including the Cboe iBoxx $ Emerging Market Bond Index Futures, which launched in June and further expands our credit futures offerings.  

We also plan to launch Cboe S&P 500 Variance Futures in September and Options on VIX Futures later in October.  

With the upcoming US election in mind, a historically significant catalyst for market volatility, we expect both products will help investors hedge against and capitalise on volatility moves during such significant market events and beyond. Crucially, these products share a common goal: to simplify and broaden access to the options market for more investors by bringing complex and capital-intensive strategies, including those traditionally traded over-the-counter, to the exchange-listed, centrally-cleared environment.  

We also continue to leverage our expertise in derivatives and indexing to enhance our growing suite of derivatives-based indices. Our latest addition, the VIXTLT Index, was launched in August and builds on the success of our Cboe Volatility Index (VIX Index).  

Drawing from Cboe’s proprietary VIX Index methodology, this new index aims to provide a comparable measure of volatility in the US  treasury market. We recognise that data and analytics are as crucial as the tradable tools themselves. Indices like VIXTLT or our credit-volatility indices offer valuable signals from key corners of the financial market that can help investors make  more informed decisions as they navigate different asset classes. 

Cboe Europe Derivatives (CEDX) recently launched its European equity options offering. What have you learned from the launch?  

Cboe’s entry into European derivatives is a strategic effort to bring the transparency, liquidity and operational efficiencies of the US options market model to Europe. In contrast to the previously fragmented nature of European derivatives markets along geographic boundaries, CEDX has also been designed from a pan-European point of view – in terms of trading, clearing and market data – simplifying access to and dramatically reducing the costs for those wishing to access these markets. 

Over the past few years, we’ve made significant progress building and expanding the CEDX platform and offerings, with the launch of single-stock options being our latest new product addition. As volumes and liquidity overall continue to build and reach new record levels, we continue to raise awareness and solicit customer participation, including from new liquidity providers and brokers that have helped to further expand liquidity and customer access.  

One segment we are especially focused on is European retail investors, whose participation remain low compared to the US and represent an untapped market with tremendous potential.  We believe there are opportunities to provide more educational content to retail traders on the capital efficiencies that exchange-listed derivatives can bring to a portfolio. Through surveys and research, we are starting to learn more about the European retail investor and their understanding of and experience with derivatives. As with every new product or market, it is important for Cboe to understand where the demand is coming from, or where access is lacking, and help fill the gaps.  

How is Cboe looking at opportunities within Asia Pacific? 

APAC is a very interesting and diverse region and represents the fastest-growing market for equity derivatives. It's important to recognise that APAC is not a monolith; each country has its own regulatory landscape and trading culture, which brings unique challenges and opportunities. For example, due to new government policy, Japan's $14 trillion in household financial assets is transitioning from low-yielding deposits to investing in domestic equity markets, which we expect will create demand for asset diversification and hedging. Meanwhile, in markets like Korea and Singapore, there's already a highly engaged retail-trader population. 

Despite these differences, a common theme across the region is a strong demand for exposure to US assets. However, some market structure obstacles, such as access barriers to market data and tradable products, persist. Collaboration with local retail brokers is critical and Cboe is actively working with them to evaluate how we can solve for these challenges and provide access for their customers.  In the first half of this year, we've made significant strides, with three new global brokers – Futu Hong Kong, Webull Thailand, and Samsung Futures – adding various Cboe products to their platforms, including our S&P 500 Index options (SPX). We believe this expansion is part of a long-term trend, and we are excited to continue facilitating access to US markets for APAC investors.  

As you approach the one-year mark in your new role, what are some achievements you’re most proud of? And expectations for 2025?  

As I reflect on the journey our team has undertaken over the past year, I am incredibly proud of the strong foundation we’ve laid. Through a strategic reorganisation, we have unified Cboe’s derivatives businesses across the US, Europe and APAC, while bringing our innovation hub, Cboe Labs, and our educational arm, the Options Institute, into the fold. This cohesive structure now positions us to fully leverage our global capabilities, deepen customer relationships and enhance our index partnerships. Crucially, it has also positioned Cboe to facilitate both the “export” and “import” of trading opportunities to our customers.  

Over the past year, we’ve successfully “exported” our US derivatives model to Europe and beyond, improving trading experiences and broadening our reach. Concurrently, we’ve seen strong demand from international investors – and increasingly, the retail segment – seeking access to US markets, highlighting the role Cboe can play in “importing” global investment opportunities into the US. 

As we look towards 2025, we will continue to build on this dual role by focusing on global partnerships, driving product innovation and ensuring that our markets serve investors worldwide. The growing segment of retail investors will remain a priority as we respond to the increasing global demand for index options. We look forward to continuing to collaborate with retail brokers to enhance investor education and expand access to market data and tradable products for their customers. Cboe has been the leader in the listed options space for over 50 years, and we will continue to advocate for the prudent use of options in investment portfolios.