Arianne Adams is Senior Vice President, Head of Derivatives and Global Client Services at Cboe Global Markets.
What were the key theme(s) for your business in 2022?
Over the past year, customer demands for hedging, trading, diversification and asset allocation have continued to evolve. We’ve seen increased interest in using broad-based, index options with shorter duration to trade and manage risk in this challenging market environment.
Staying attuned to our customers’ needs, we expanded our proprietary product suite, adding new Tuesday and Thursday-expiring S&P 500 Index (SPX) options and Mini SPX (XSP) options to provide expirys on every business day of the week. With these daily options, customers can more precisely manage intraday volatility and respond to market-moving events.
In tandem with these efforts, we expanded access to our products. News doesn’t stop when the U.S. trading session ends, and investors want the ability to adjust their positions at all hours. Evidencing that, volumes and liquidity have continued to build during our Global Trading Hours (GTH) session this year, driven by participation from both Europe and APAC customers. Building on this momentum, we introduced XSP options to GTH in December to bring even more product versatility to manage risk efficiently around-the-clock.
Finally, we continued to enhance our customers’ experience in trading Cboe Volatility Index (VIX) options and Mini VIX futures with a series of new market structure changes, such as smaller tick increments and pricing adjustments. We were excited to also grow our client coverage team with additional staff focused on driving greater engagement with our retail and institutional customers.
What surprised you in 2022?
The acceleration of the growth in ultra-short-dated options over the past six months has been incredible to witness. Looking at our SPX suite, we’ve seen similar trends and adoption of short-dated SPX options from a surprisingly broad user base, including retail, institutions, banks, market makers and liquidity providers.
What’s also interesting is that these customers are using a variety of trading strategies to define their investment objectives — whether it is yield enhancing strategies, directional trading to express their views on intraday market moves, or executing limited risk, vertical spread trades. We believe all these diverse strategies from participants of all account sizes are creating a healthy, liquid ecosystem.
Data shows this trading activity isn’t slowing down and we are closely monitoring to see how this market will evolve. Investors are learning to appropriately position trades in this market environment with defined-risk strategies that are performing — and that may be a reason why we haven’t seen volumes ease. And as we’ve seen time and time again, when our customers discover the many benefits that cash-settled, index options can provide, they will likely continue to use them, no matter the market conditions.
What are your expectations for 2023?
We keep our customers’ priorities at the core of everything we do, with every decision aimed at optimizing their trading experience. Going forward, we’ll continue to find ways to expand access to our products, enhance functionality for existing offerings, and introduce new tradeable solutions as we look to evolve and refine our product suite.
We’re also excited to further build on Cboe’s leadership in the volatility space and explore what the next generation of our index product suite could look like. We’ve been in close consultation with our customers and index partners to help shape our product innovation roadmap, and look forward to bringing many of our new concepts to life in 2023.
Looking at the macro trading environment ahead, we expect there will be continued investor demand for risk management, income generation and portfolio diversification. The market conditions of the past year have been conducive to broad-based, index options strategies, and both retail and institutional investors have learned to smartly incorporate options-based strategies in their portfolios. Regardless of what lies ahead, Cboe remains committed to providing the solutions to help customers navigate any market environment.
