Derivatives and securities exchange network Cboe Global Markets, Inc today announced plans to refocus its digital asset business to leverage its core strengths in derivatives, technology and product innovation while realizing operating efficiencies for both Cboe and its clients.
These changes are being made as part of Cboe’s strategic review, taking into consideration the lack of regulatory clarity in the digital space, and are aligned with Cboe’s longer term strategy.
Cboe plans to transition and fully integrate its digital asset derivatives, currently offered by Cboe Digital, into its existing Global Derivatives and Clearing businesses. This move is expected to create efficiencies for Cboe and clients, while enabling Cboe to harness the power of its broader global derivatives franchise and global technology platform to support and fuel growth of the exchange-traded digital asset derivatives market.
Additionally, the company plans to wind down operations of the Cboe Digital Spot Market, the company’s spot digital asset trading platform, in the third quarter of 2024, subject to regulatory review. John Palmer, President of Cboe Digital, will become Head of U.S. Derivatives Market Development, under the leadership of Cathy Clay, EVP, Head of Global Derivatives.
Cboe plans to transition its cash-settled bitcoin and ether futures contracts, currently available for trading on the Cboe Digital Exchange to the Cboe Futures Exchange (CFE) in the first half of 2025, pending regulatory review and certain corporate approvals.
This move will consolidate all Cboe U.S. futures products, including digital asset futures, onto one exchange powered by world-class technology, creating efficiencies for clients across the globe. By transitioning digital asset derivatives to CFE, this product set will benefit from the holistic support of the Cboe Global Derivatives business, including global derivatives sales and distribution, product development, market structure and investor education expertise.
“Refocusing our digital asset business enables us to refine our strategy, leveraging our core strengths in derivatives, technology excellence and product innovation to help maximize opportunities for our business and deliver efficiencies for Cboe and our clients,” said Fred Tomczyk, Chief Executive Officer of Cboe Global Markets. “We believe these changes enable greater optimization and strategic alignment for our business across geographies and asset classes, further supporting our long-term growth strategy.”
In addition, Cboe will maintain ownership and operation of Cboe Clear Digital, the clearing arm of Cboe Digital, and plans to align Cboe Clear Digital with Cboe Clear Europe, its European clearing house, under unified leadership. Cboe Clear Digital will continue to facilitate the clearing of bitcoin and ether futures.
Cboe Clear Europe will continue to serve as the pan-European central clearing party (CCP) for Cboe’s European equities and derivatives exchanges across the EU, UK and Switzerland. Vikesh Patel, the current President of Cboe Clear Europe, will now also oversee U.S. clearing.
“Bringing digital asset derivatives and clearing into our existing business lines enables us to leverage the full breadth of our global derivatives team and unlock the full value of Cboe to our clients around the world,” said David Howson, Global President of Cboe. “We expect to continue to see greater demand for exchange-traded derivatives to help manage crypto exposures, hedge risk and enhance capital and operational efficiencies. Optimizing our derivatives and clearing business operations and product development across borders and asset classes enables us to better serve our diverse client base and sharpen our strategic focus.”
The company anticipates that the wind down of the Cboe Digital Spot Market operations will have an immaterial impact on Cboe’s net revenue in 2024. The company estimates that expense savings will be in the range of $2 million to $4 million in 2024, with savings expected to be in the $11 million to $15 million range on a normalized annual basis. Cboe will provide more details about these strategic changes during its forthcoming first-quarter 2024 earnings call on May 3, 2024.
