U.S. Equities Initiatives in 2020: A Note to Customers

As Head of U.S. Equities at Cboe, I recently laid out my team's plans for 2020 in a letter to Cboe's customers. Read on to learn about what's in store for U.S. Equities at Cboe this year.

Cboe’s Customer-First Approach

• As we start a new year at Cboe, we’re going all-in on our customer-first approach by organizing ourselves in a way that better serves you. What exactly does that look like?Expert Dialogue. A dedicated team that knows you, your firm and your trading goals. We’re adding more industry talent that will further strengthen and expand the capabilities of our existing team.
• Increased Outreach. Client feedback is crucial to Cboe’s innovation process, so you can expect to see us more regularly as we focus on being even more actively engaged with you.
• Proven Leadership. You’ll hear more from us on the issues impacting our industry as we aim to be more outspoken on our views and advocate for enhanced market structure. We’re not afraid of having the important conversations. We’re actively engaged with our industry peers and regulators and we’re eager to share our insights with you.

Cboe’s Equity Markets Advocacy

Cboe continues to be at the forefront of equity markets advocacy with initiatives to promote fair, efficient and transparent markets. We’re taking a leadership role to discuss, educate and collaborate with our legislators and regulators on key issues affecting our markets and our customers. For example, here’s our latest proposal to enhance trading for thinly traded securities. Also keep an eye out for our Market Structure Principles document, which will be released later this month, to learn more about Cboe’s perspective on Reg NMS and our suggestions to improve market quality, without incurring the risks and complications of a large-scale market structure overhaul.

 2019: A Year in Review

This past year continued to test our resolve as a securities exchange operator, with a number of ongoing regulatory developments that threaten the ability of exchanges to price, compete and innovate. In response – and in close consultation with our customers – Cboe introduced several innovations intended to bring positive change to the U.S. equities market in 2019.

 Engaging the Retail Market

On November 1, we launched Retail Priority on Cboe’s EDGX Exchange, our exchange catering to retail flow. Our Retail Priority model was designed to reduce time to execution for individual investors (and the firms facilitating their orders) by posting displayed limit orders at the front of the order queue for same-priced orders submitted on Cboe EDGX. We are encouraged by the enhanced execution quality and trading outcomes we’ve seen thus far, and plan to share some insights, data and analysis with you as we onboard more customers.

In another effort to expand our leadership in serving the retail investor community, Cboe introduced a program that allows small retail brokers to use and distribute Cboe’s real-time U.S. equities exchange data at reduced rates. In turn, this program helps broaden access to valuable market information for individual investors.

We are pleased to see that customers are increasingly turning to Cboe EDGX as their venue of choice to execute trading strategies.

 LP2 on Cboe EDGA Exchange

Earlier this year, we announced plans to introduce a new delay mechanism on the Cboe EDGA Equities Exchange called LP2. We continue to believe in the merits of this proposal and its benefits; that it would encourage more competitive liquidity provision, lead to enhanced market quality, and promote choice for investors without placing any new or novel regulatory obligations on broker-dealers. Your feedback is welcome, and we look forward to our ongoing dialogue with regulators, legislators and all our customers in 2020, as we continue our efforts to bring LP2  to market. You can also check out our latest response, addressing industry comments about LP2 here.

 Cboe Market Close (CMC)

We remain optimistic that the original approval order for Cboe Market Close (CMC) will be reaffirmed by the SEC. In recent years, closing auction fees have risen significantly – anywhere between five to 60 percent at the primary listing markets – and as a result, a growing portion of trading has become increasingly expensive for market participants. We believe Cboe’s alternative mechanism to primary market closing auctions will provide more choice in the marketplace and significant cost benefits to customers. We’re excited and ready for movement on CMC in 2020.

 Engage with Us

Cboe’s customer-first approach drives our mission of defining markets. It’s an active pursuit to bring meaningful benefits to market participants through the services we provide, the new initiatives we launch and the market structure reform we advocate for. The Cboe equities team was highly ambitious in 2019 but the best is yet to come.