Derivatives and securities exchange network Cboe Global Markets, Inc today announced plans to refocus its digital assets business to leverage its core strengths in derivatives, technology and product innovation while realizing operational efficiencies for both Cboe as well as for its customers.
These changes are being made as part of Cboe’s strategic review, taking into account the lack of regulatory clarity in the digital space and aligning with Cboe’s long-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 allowing Cboe to leverage the strength of its broader global derivatives franchise and global technology platform to support and fuel the growth of the digital asset derivatives market traded on the stock exchange.
In addition, the company plans to cease operations of Cboe Digital Spot Market, the company’s spot trading platform for digital assets, in the third quarter of 2024, subject to regulatory review. John Palmer, President of Cboe Digital, will become Head of US Derivatives Market Development, under the leadership of Cathy Clay, EVP, Head of Global Derivatives.
Cboe plans to migrate its cash-settled bitcoin and ether futures contracts 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 US futures products, including digital asset futures, into one exchange powered by world-class technology, creating efficiencies for clients around the world. With the transition of digital asset derivatives to CFE, this product suite 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 assets business enables us to refine our strategy, leveraging our core strengths in derivatives, technological excellence and product innovation to maximize opportunities for our business and deliver efficiencies for Cboe and clients us,” 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 retain 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 act as the pan-European central clearing counterparty (CCP) for Cboe’s European equity and derivatives exchanges across the EU, UK and Switzerland. Vikesh Patel, the current President of Cboe Clear Europe, will also oversee US clearing.
“The introduction of digital asset derivatives and clearing to our existing lines of business 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 improve capital and operational efficiency. Optimizing our derivatives and streamlining 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 expects the discontinuation of the Cboe Digital Spot Market operations to have an immaterial impact on Cboe’s net income in 2024. The company estimates cost savings to be in the range of $2 million to $4 million in 2024, with savings expected to be between 11 and 15 million dollars on a normalized annual basis. Cboe will provide more details on these strategic changes during its upcoming first quarter 2024 earnings call on May 3, 2024.