Cboe Unlocks Global Market Access with Powerful New VIX Options

Summary

Dave Hon, Global President of SIBO, discusses the company's evolution and innovations in financial markets, including its pioneering role in options trading. He highlights SIBO's diverse offerings, such as equities, options, and futures, and emphasizes the significance of partnerships with retail brokers like Robinhood. Dave shares insights into SIBO's tools for managing market volatility and how recent products, like VIX options on Futures, enhance traders' strategies. Reflecting on the growth of retail participation in trading, he expresses excitement for future innovations, global expansion, and the continued development of educational resources for traders.

Takeaways

• 😀 SIBO (Chicago Board Options Exchange) operates 27 global markets, covering a variety of asset classes like equities, options, futures, and FX.
• 😀 SIBO pioneered options trading 51 years ago, allowing traders to manage risk and volatility in their portfolios.
• 😀 Partnerships with retail brokerage platforms like Robinhood have significantly increased retail participation in options trading over the last five years.
• 😀 SIBO focuses on educating retail traders about options products and helping them understand how to manage volatility and risk.
• 😀 SIBO's new innovation, options on VIX futures, adds more precision to volatility management with different expiration dates for traders.
• 😀 The hybrid trading model at SIBO combines electronic trading and human interaction on the trading floor, particularly for large and complex trades.
• 😀 A significant percentage of SPX and VIX options trading still occurs on SIBO’s trading floor, demonstrating the continued importance of floor-based liquidity and price discovery.
• 😀 SIBO has adapted to the growth of electronic trading by reopening its trading floor in a new facility after the pandemic experiment of closing it.
• 😀 The evolution of options products at SIBO includes innovations like zero-DTE (days to expiration) options, allowing more flexible trading strategies.
• 😀 SIBO is excited about the growing global demand for U.S. capital markets access, and is focused on expanding its product offerings to meet this need.
• 😀 Dave Hon is optimistic about the future of trading, highlighting the increasing sophistication of retail traders and the importance of expanding SIBO’s volatility toolkit.

Q & A

What is CBOE Global Markets, and what does it do?

CBOE Global Markets is a global exchange company that operates 27 markets worldwide. It offers a variety of asset classes including equities, options, futures, digital futures, and FX. The company originated 51 years ago as the creator of options, providing people with the ability to define outcomes and manage risk and volatility in their portfolios.

How important is the partnership between CBOE and retail brokerages like Robinhood?

The partnership is incredibly important as it helps build liquidity ecosystems, particularly with retail brokerages. CBOE works with liquidity providers and retail platforms to educate and support the growing usage of options. This partnership also facilitates broader access to trading strategies for retail participants.

What new products did CBOE introduce in October 2024, and how can traders utilize them?

In October 2024, CBOE introduced options on VIX Futures. These new options allow traders to manage volatility exposure more effectively, with finer-grained volatility management strategies. They are particularly valuable for global participants and provide access to a futures venue for more sophisticated trading strategies.

What does CBOE’s 'volatility toolkit' offer to its customers?

The volatility toolkit at CBOE is designed to help customers manage risk across various market cycles and volatility regimes. It offers different trading strategies such as hedging, income generation, and systematic trading strategies, allowing users to navigate diverse market conditions effectively.

How has the growth of retail participation in options trading been characterized in the last five years?

The growth has been tremendous, with a significant increase in the utilization of options by retail participants. Over the past five years, especially after the pandemic, retail investors have become more sophisticated, shifting from meme stock trading to more strategic approaches like index options and ETF options.

What is the significance of CBOE’s in-person trading floors today, and how do they differ from virtual trading?

CBOE’s in-person trading floors remain significant for large, complex trades that benefit from human interaction. These trades facilitate price discovery and liquidity curation, which is crucial for certain transactions. While the majority of trades are electronic, a portion of transactions, especially complex ones like VIX options, still occur on the floor.

What impact did the pandemic have on CBOE’s trading operations?

The pandemic forced CBOE to temporarily close its trading floor, but the company adapted quickly by increasing electronification. Despite the challenges, the demand for options continued to rise, leading CBOE to reopen its trading floor in a new facility. This adaptation ensured that CBOE could continue offering efficient trading services while maintaining liquidity.

What role does education play in CBOE's strategy for expanding options trading?

Education is a critical component of CBOE’s strategy to help users better understand options trading. As retail participation has grown, CBOE has prioritized providing educational resources to help users learn how to manage volatility and risk, and utilize different trading strategies to enhance their portfolios.

What new features are being introduced to enhance the VIX options trading experience?

CBOE has introduced more sophisticated features such as VIX options on futures. These options allow for finer-grained volatility management strategies with shorter expirations and enhanced functionality. Additionally, the new products provide greater access to global participants looking to manage volatility exposure in the markets.

Looking ahead, what excites CBOE about the future of trading and options markets?

CBOE is excited about the increasing demand for options trading and the continued evolution of the retail market. The development of new products and features, such as expanding the volatility toolkit, is a key area of focus. Additionally, CBOE is enthusiastic about the growing international demand for access to U.S. capital markets and the opportunities to enhance its offerings to meet these needs.