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OTC businesses shouldn’t view this as a rivalry, and derivatives platforms shouldn’t view OTC businesses that way, either. Instead, it should be seen as a synergy that can bring established and highly reliable listed products within reach of retail traders.

Chicago

Lobbying attempts in which regulators have been pressured to restrict the methods by which over-the-counter retail firms deliver their products, very high-value mergers and acquisitions, and attempts to portray retail foreign exchange firms As lower in the ecommerce pecking order are three long-standing methods used by major derivatives exchanges to get a piece of the retail pie.

In 2017, exchanges spent hundreds of millions acquiring foreign exchange firms and lobbying regulators in an attempt to trip up CFD firms. Now exchanges are nowhere to be found and FX brokers are doing well, signaling a renaissance for OTC 2020 trading may well have been something of a blur, but one thing that has been overlooked and recorded in the annals of memory is A few years ago, major global exchanges attempted to pressure regulators and acquire non-bank FX market makers in order to force retail currencies onto the exchanges.

The recent history of many large stock technology and listed derivatives companies is enough to influence scholarly opinion in this direction as well.

Today, CBOE, one of Chicago’s most established platforms, announced its intention to launch Mini-Russell 2000® Index options trading on Cboe Options Exchange starting Monday, March 1, pending regulatory approval.

The introduction of these options looks like angling products to small retail traders, a direction CBOE has wanted to take since the major attempts by its peers in derivatives markets five years ago.

The new options in the Mini-Russell 2000 Index (ticker symbol: MRUT) are designed to provide direct exposure to the Russell 2000 Index under a more reasonable and profitable contract. Mini-options will share the same contractual terms as standard options on the Russell 2000 Index (ticker symbol: RUT) but will be one-tenth of the size of the standard contract, making them comparable to ETF options which offer similarly. exposure to US small cap stocks. With a smaller notional value, the Mini-Russell 2000 Index options help provide investors with potentially greater flexibility and precision when managing the risk of the US small-cap market or allocating among them. accounts.

The creation of the mini-contract follows Cboe’s success with the Russell 2000 Standard Options – one of the five most liquid cash-settled equity index options listed in the United States – and will provide investors with additional tools to execute their transactions. small cap US equity trading strategies. With the launch of options on the Mini-Russell 2000 Index, Cboe also continues to expand its offering of tradable index products featuring a mini-contract, including futures on the Mini Cboe volatility index (ticker: VXM ) and options on the Mini S&P 500 Index (ticker: XSP), designed to attract a wide range of investors, including sophisticated retail traders looking to hedge or gain exposure to the broad US stock markets.

Arianne Criqui, Head of Derivatives and Global Client Services at Cboe Global Markets, said: by offering Mini-Russell 2000 index options. Offering the features of index options trading in a more manageable and larger size vehicle Flexible, Mini-Russell options could serve as an alternative to comparable ETF options and a valuable tool for investors to potentially increase returns and effectively hedge risks.

Cboe expects the utility of the Mini-Russell 2000 Index options to help meet the investment needs of a wide range of market participants, ranging from new index options traders to traders. from sophisticated retail managing an individual portfolio, to small and mid-sized institutional investors looking to execute strategies based on small cap options. Similar to the standard Russell options, the Mini-Russell 2000 Index options will be structured as European style options (no early exercise) and cash settled (no unwanted delivery or transfer of shares) at the end of the day. expiration with PM settlement.

The Russell 2000 Index is the world’s leading benchmark index measuring the performance of the small-cap segment of the US stock market. Standard monthly options replicating the Russell 2000 Index were first offered at Cboe in 1992. In 2020, the average daily volumes of options on the Russell 2000 Index traded at Cboe were approximately 34,000 contracts with a total open interest of over 600,000 contracts.

In Chicago in 2016, FinanceFeeds met with CBOE whose executives demonstrated a new product that was certainly part of the company’s mission to appeal to retail traders.

CBOE LIVEVOL has exclusively revealed that it is launching a brand new website next week, under the name Data Shop.

Catherine Clay, Vice President of Business Development at CBOE LIVEVOL, spoke with FinanceFeeds to explain how the new site is revolutionizing the method by which all traders can now obtain data, and high-level institutional information is now transmitted to the retail trader.

Ms. Clay explained at the time, “Next week we will be launching a new market data website called Data Shop where we are offering customers the ability to customize a historical data set or data subscription with a data experience. ‘Amazon-type purchase. “

“The customer can go online, create an account, customize down to the smallest detail, pay for their orders and receive automated instruction on where to collect their data,” she enthused. “All orders will be remembered, as will the buying behavior, and therefore it streamlines their shopping experience, in the same way that today’s consumers are used to this methodology with e-commerce sites. such as Amazon. “

CME Group’s 2017 survey on the possibility of embarking on a project in which it provides a sliding cash contract is another example, as this would position it as a direct competitor to OTC derivatives companies.

Then there was the acquisition by Deutsche Boerse in July 2015 of the FX 360T trading platform for $ 796 million. Now Deutsche Boerse is embroiled in its difficult merger with the London Stock Exchange, which was considered monopolistic by the European Commission, but this will continue due to the impending sale of LCH SA, the European division of the clearing division of LSE LCH.Clearnet as a condition of the transaction company, whose buyers will be its biggest customer.

Hotspot FX, one of the world’s most renowned OTC FX ECNs, was bought by BATS Global Markets for $ 365 million in January 2015. It is also important to look at the direction of EUREX in which, in September of This year, the site had extended its listed FX futures contracts and The options portfolio will include six new currency pairs while the overall minimum block trade size has been reduced for all currency pairs to further improve the coverage opportunities.

At that time, the idea was to increase Deutsche Boerse’s positioning in providing pre-trade price transparency in the derivatives arena for institutional investors and to take a first footprint in the derivatives space. exchange rate. An investment agreement was signed in December 2016, under which Deutsche Börse will pay an amount in US dollars in the order of one million dollars.

FinanceFeeds also knew at that time that this had been a priority for Deutsche Boerse for some time. In 2011, Deutsche Boerse acquired a minority stake in UK foreign exchange technology solutions provider Digital Vega, which was a technology provider for buy-side and sell-side businesses in the OTC derivatives industry.

EUREX bought the 360T treasury system, with the intention of moving the entire foreign exchange structure from a bilateral over-the-counter system to an exchange clearing structure in my opinion. NASDAQ, which wanted to launch NASDAQ FX but was unable to do so, did not understand the nuances of providing liquidity in an OTC trading environment versus the dynamics of exchange traded products.

More recently, it has become clear that the OTC world is still in the crosshairs of the stock exchanges, with the Luxembourg Stock Exchange investing in the UK bond issue platform Origin, alongside its fellow investor Clearstream.

Unlike a company’s shares that trade on an exchange, most corporate bonds are traded over-the-counter (OTC). it left with the listed leviathans trying to enter the OTC sector through the backdoor.

Founded in 2015, Origin helps brokers and issuers streamline the issuance process and is currently used by over 20 brokers and 90 issuers in 50 cities around the world.

The company said it will work with Clearstream and LuxSE to create an end-to-end, open and direct access digital process for the issuance, settlement and listing of debt instruments, starting with euros. -obligations.

OTC businesses shouldn’t view this as a rivalry, and derivatives platforms shouldn’t view OTC businesses that way, either. Instead, it should be seen as a synergy that can bring established and highly reliable listed products within reach of retail traders, meaning now is the time to embrace the capability of multi-asset products via your platform.

Most certainly, there is a need for all FX brokers to be able to offer multi-product connectivity to global markets, and in doing so, they will not only attract a greater caliber of clients with much longer lifetime value, but will also avoid regulations. the coercion exerted on CFD companies and open a potential commercial synergy with exchanges.

This must be the way forward.


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