[ T H O U G H T L E A D E R S H I P | C B O E ]
A NEW WAY FORWARD :
driving innovation in European equity derivatives
US and European options markets have experienced contrasting fortunes over the past decade . As shown in the chart below , US index options volumes have surged while European activity has flatlined . Although valuetraded in the two regions were comparable in 2009 , European index options value-traded at the end of 2019 amounted to ~ 13 % of the US total .
This divergence is the result of the overall outperformance of the underlying US equity indices versus those in Europe , as well as differences in the market structure between the two regions . The European listed equity derivatives market is fragmented along national lines , with limited competition outside single stock futures and options , which has stunted its growth .
Against this backdrop , there has been increasing interest among market participants for
Cboe Global Markets outlines its approach to bringing competition and innovation to Europe ’ s equity index futures and options markets ahead of the launch of its new equity derivatives exchange , Cboe Europe Derivatives , in September .
a new European futures and options exchange which takes a modern , innovative , truly pan-European approach and facilitates access to both USstyle on-screen liquidity and off-exchange block transactions . This would complement the existing market structure , bring much-needed competition to Europe ’ s derivatives landscape and use a technology-driven approach to create a deeper , more liquid market by aggregating different types of client demand .
Enhanced on-screen liquidity in particular would help attract new sources of order flow to Europe from those US participants accustomed to trading listed options in their home market , as well as European clients that value an electronic on-screen model , thereby creating trading opportunities for both new and existing participants and benefitting the market overall .
30 // TheTRADE // Summer 2021