Cboe Global Markets is set to launch a new derivatives exchange in Amsterdam in September, adding options trading to its push into the EU market now that the UK has left the bloc.
The exchange trader secured the backing of Goldman Sachs, Morgan Stanley and many players in the electronics market in a bid to compete in an environment it has long viewed as lagging behind the United States, its market domesticated.
The exchange plans consist of offering futures and options trading on six European equity indices, including blue-chip stock tracking contracts in the UK, Germany, France and Switzerland.
The exchange has said it wants to wrest the grip of the EU derivatives market from brokers, who typically negotiate complex deals privately over the phone before sending them as a large block of trades to an exchange. such as Deutsche Börse and Intercontinental Exchange.
Instead, Cboe wants to introduce an American-style system, in which most bids and offers are available for traders to see on a computer screen on a central order book – increasing the dynamism. and the competitiveness of relatively calm trading in Europe. He pointed to data collected from the industry that the notional value of transactions traded in the United States had grown from just over $ 20 billion to $ 140 billion annually over the past decade. Europe was virtually unchanged at $ 20 billion.
“It should have happened maybe a few years ago,” said Ade Cordell, President of Cboe Netherlands. “You see the liquidity moving off the screen and heading towards the blocks. It’s a deal to be executed [trades] at.”
The launch builds on Cboe’s growing push in Europe after Brexit. The majority of its day-to-day equity trading moved from London to the Netherlands at the start of the year, while in 2019 it bought the 80% of EuroCCP it previously did not own to secure l future of the Dutch equity clearinghouse.
Dave Howson, president of Cboe Europe, described the change in commerce as “a bridgehead” for its entry into the European market.
But many in the market are skeptical that Cboe will make progress in its redesign. In recent years, exchanges such as Deutsche Börse have struggled to close large blocks of deals on its site.
Many of the most traded equity contracts on the continent are already traded “American style” through a central order book. Over 80% of FTSE 100 index futures traded on ICE Futures Europe are traded through an order book and only 17% as block trades.
In an attempt to create liquidity in the market, Cboe has enlisted the support of market makers such as DRW, Flow Traders and Susquehanna International Securities. Dutch bank ABN Amro Clearing, which handles millions of securities and derivatives transactions per day for clients including high-frequency traders and market makers, also supports the site.
The new exchange will launch on September 6, if it receives approval from the Dutch market regulator and the central bank. The contracts will be based on CBOE indices and cleared at EuroCCP in Amsterdam.