Cboe Digital hit a record average daily notional value in January as it said it benefitted from being an established market operator with a regulated framework.

Ed Tilly, chairman and chief executive of Cboe Global Markets, said on the earnings call on 3 February 2023 that record results were driven by strong volumes across the global network, led by the derivatives complex and continued growth in the data and access solutions business.

“We continued to execute on the transformational opportunities we saw in our business: derivatives; data and access solutions, and Cboe Digital,’ he added.

In May 2022 Cboe Global Markets completed its purchase of Eris Digital Holdings (ErisX), an operator of a US-based digital asset spot market, a regulated futures exchange and a regulated clearinghouse, which is the cornerstone of the new Cboe Digital business.

Last November Cboe completed the syndication of minority equity interests with a group of 13 firms announced as investor partners in the Cboe Digital business. Tilly said Cboe is now actively onboarding these partners to the Cboe Digital platform.

“Now more than ever, we believe the experience that established market operators provide, with the benefits of their regulated framework, is critical to helping enable the opportunities afforded by this asset class,” he added.

Volumes have increased on Cboe Digital according to Tilly, and reached a record average daily notional value in January of more than $71m.

Why I’m All-In on TradFi’s Regulated Approach to Digital Assets https://t.co/QThR7wGn92 pic.twitter.com/EbNFQUAZAY

— CboeDigital (@CboeDigital) January 25, 2023

Global trading

Tilly continued that Cboe continues to see increased demand from non-U.S. customers, and highlighted a sizable increase in trading volumes of S&P 500 index (SPX) derivatives  during Global Trading Hours. In U.S. time, Cboe’s Global Trading Hours session begins at 8:15 p.m. ET and runs until 9:15 a.m. ET the following morning.

For example, last December Cboe extended trading in Mini S&P 500 Index options during global trading hours (GTH), which made the product available to customers nearly 24 hours, five days a week which provides the ability to adjust positions around the clock with more precision and flexibility.

“Average daily volume increased 216% year-over-year during the fourth quarter to nearly 55,000 contracts, capping off a record year for Global Trading Hours with total volumes up three times over 2021 levels,” he added. “This year is off to an even stronger start as January volumes ran approximately 55% above 2022 levels.”

There was also increased demand for same day trading in SPX, with many market participants opening and trading positions on the same day the options expire as they engage in tactical trading strategies around market events.

“Average daily volume for SPX options opened on the same day of expiration increased 83% throughout 2022 and comprised over 43% of overall SPX volumes in the fourth quarter,” said Tilly.

15,765 trades were executed in $SPX #options Global Trading Hours, totaling 92,002 contracts.

Get more alerts at https://t.co/WADTEhJGXg. #DataAndAccess pic.twitter.com/LRQNY1Dsq2

— Cboe (@CBOE) February 3, 2023

Data and Access Solutions

In addition, Cboe continues to see strong customer uptake of Cboe Global Cloud according to Tilly, a real-time data streaming service that provides access to Cboe’s suite of market data.

“We now have 25 customers connected to the service, with 52% of revenue coming from the Asia Pacific region and 38% from Europe,” added Tilly. “Additionally, many customers are subscribing to multiple data products offered via Cboe Global Cloud.”

Last year Cboe also launched its One Canada Feed, a real-time market data feed that provides a comprehensive view of Canadian equities market data. Tilly said that as Cboe Australia and Cboe Japan are migrated onto the group’s technology, it will further expand the portfolio of market data available globally.

In Canada, Cboe’s overall equities market share in grew to 13.6% in the fourth quarter

“We remain on track with the launch of Cboe BIDS Australia this month,” added Tilly. “Our experience bringing BIDS into new markets globally, including Europe and Canada, has enabled us to perfect our approach and we are very excited about the demand we have seen from local participants for this distinctive block-trading platform.”

Financial results

Brian Schell, chief financial officer and treasurer of Cboe, said on the results call that the group posted an incredibly strong fourth quarter to cap off a record year.

Cboe Global Markets reported an 18% increase in full-year net revenue 18% to a record $1.7bn.

Average daily volume in the index options franchise rose 55% year-over-year, with record volume across the suite of S&P 500 index options products.

Schell said the options segment was a standout for the fourth quarter, delivering the strongest growth with net revenue increasing 35%. The results were driven by robust volumes in the index business and stronger revenue per contract

“It is because of the investments we have made in our business that we generated record 2022 results and are able to guide to a robust 7% to 9% increase in organic total net revenue in the year ahead,” Schell added. “We believe that the investments we make in 2023 will position us well to generate attractive returns for years to come.”

Organic total net revenue growth is above the  medium-term guidance of 5% to 7% introduced at Cboe’s investor day a little more than a year ago.

Schell continued that Cboe will look to continue to make investments that align with its strategic vision.

“Our investment in 7RIDGE with Cboe becoming a limited partner in the acquisition of Trading Technologies is a great example of how we plan to utilize our network of partners to invest in strategic assets,” he said. “We look for the impact of these investments to become a more regular contributor to company earnings and are providing our best estimate of the benefit we anticipate in 2023.”