Cboe Europe Derivatives (CEDX) First Quarter 2023 Update

Iouri Saroukhanov, Head of Derivatives for Cboe Europe, summarises CEDX’s highlights over the last three months and looks ahead to its plans for the rest of the year.

CEDX has had a busy and exciting Q1 as we continued our journey to creating a modern, vibrant pan-European equity derivatives marketplace that brings greater efficiencies to participants and grows the European market overall.

Some key Q1 highlights, which we explore further below, include:

• Record volumes in March, with activity in futures more than doubling;
• Announcing our expansion into pan-European single stock options, which will be introduced from November 6, 2023;
• Highlighting the eligibility of CEDX futures to qualified US investors
• Cboe Clear Europe, CEDX’s clearing provider, achieving permanent UK recognition and Swiss authorisation for equity derivatives.

Chart 1 – CEDX Total Monthly Volumes Since Launch

Source: CEDX

Volumes and Participation

CEDX continued is growth momentum from the end of 2022 into 2023, with a further increase in volumes. March was an all-time record month with 6,574 contracts traded, beating the previous record of 3,824 contracts set in January (see chart 1).

Activity in futures more than doubled during March, with a record 5,971 contracts traded, up from 2,591 in February. In terms of specific contracts, the largest volume since launch continues to be in the Cboe Eurozone 50 index options contract (EZ50O), followed closely by the Cboe Eurozone 50 index future (EZ50F). You can view our March infographic here for further information on volume breakdowns. Alongside growing volumes, CEDX’s liquidity picture continues to improve, helped by existing participants and the addition of new members. Having expanded our futures client base in late 2022 we are also in final stages of conformance with new options market maker. We are also continuing to see interest from a range of new firms, including retail brokers, institutions and regional firms who excited by CEDX’s proposition.

You can read a Q&A with Flow Traders, one of our futures participants, on their support of CEDX and how it is helping to bridge the gap between US and European derivatives, here.

Product Updates

In February, we were delighted to announce our intention to expand into pan-European single stock options later this year, subject to regulatory approvals. We have been making great progress on the build out of this product suite and recently finalised November 6 as the launch date for the first tranche of products, which will include equity options on companies from 12 European countries (Belgium, Denmark, Finland, France, Germany, Italy, the Netherlands, Norway, Spain, Sweden, Switzerland and the UK). The key testing dates the run up to launch are available here.

The addition of single stock options is a key component of our ultimate vision for CEDX and we believe it will accelerate the momentum behind our aim of creating the most complete pan-European equity derivatives ecosystem. Like Cboe Europe's cash equity exchange, the CEDX model is designed so that participants can trade, clear and settle pan-European single stock options with minimum disruption and full fungibility in the domestic CSD. We are already receiving strong interest from participants in bringing these products to market, from both the institutional and retail communities, who share Cboe's desire to expand access to derivatives more widely.

Due to recent market developments, we wish to highlight that all CEDX index futures products are based on indices from our benchmark administrator Cboe Europe Indices, where daily checks are performed that help to ensure that CEDX index futures adhere to CFTC rules on broad-based indices. This enables qualified US investors to access CEDX futures, providing they do so via brokers. Please do speak to us if you have any questions on this issue.

Clearing

Finally, Q1 also saw significant milestones from a clearing perspective, with Cboe Clear Europe, CEDX’s clearing provider, gaining permanent UK recognition from the Bank of England. You can read the announcement here. Since the end of the Transition Period between the UK and EU in 2020, Cboe Clear Europe – as an EU-authorised CCP - had been a participant in the UK's Temporary Recognition Regime for non-UK CCPs, which allowed it to continue to offer cash equity clearing to UK clearing participants and trading venues while it sought permanent recognition under the UK regime.

Gaining permanent recognition removes any uncertainty for UK-based clearing members and UK trading venues that wish to continue to access Cboe Clear Europe and benefit from its services on a permanent basis. It is particularly important in further extending its equity derivatives service among UK clearing participants, in support of CEDX.

Additionally, FINMA, the Swiss regulator, recently extended Cboe Clear Europe's existing cash equity clearing authorisation to cover equity derivatives. This means it can now offer clearing services in these instruments to Swiss-based clearing participants in support of CEDX.

Disclaimer: This information is not being provided as part of an offer or sale of any futures or options products to any persons located within the United States.