Dave Howson is Global President of Cboe Global Markets.
What were the key theme(s) for your business in 2023?
In 2023 we celebrated 50 years of Cboe and listed U.S. options and launched a reinvigorated brand identity to reflect our new global reach and ambitions. It was a momentous year following a years-long period of transformation and global integration for Cboe. As we enter our next phase of growth, we remain focused on solidifying our position as a trusted global exchange leader and delivering innovative solutions that drive the trading ecosystem forward across the globe.
U.S. options volumes industry-wide set another record in 2023 as more investors seek the utility and flexibility derivatives provide to manage risk and generate income. We saw that demand extend globally and continued to increase access to our proprietary products to investors worldwide, including in Europe, where we recently launched single-stock options on our Cboe Europe Derivatives Exchange (CEDX). The adoption of daily-expiring S&P 500 Index (SPX) options in particular, has allowed many investors to trade and hedge risk with much more granularity and precision. Seeing this utility, we’re excited about our plans to begin offering daily options on the Russell 2000 Index in January.
Our customer-driven approach extended to the introduction of new innovative indices that provide deeper views into market volatility and facilitate investor access to new trading strategies. Complementing the growth of short-dated, or 0DTE, options, we launched the Cboe 1-Day Volatility Index (VIX1D) to provide traders a tool measuring short-term expected volatility. And we launched the S&P 500 Dispersion Index (DSPX), which measures the expected dispersion in the SPX and can be a valuable tool for active investors seeking to explore trading opportunities between the single stock and index levels—particularly in an environment of high dispersion and lower volatility.
What trends are getting underway that people may not know about but will be important?
Market participation is steadily on the rise, leading to a growing demand for liquidity and increased capital efficiencies. To that end, we continue to work with our regulators, customers and industry partners to solve for those needs across our exchanges, regions and asset classes. Whether it is introducing new trading functionalities that allow for more precise risk management and capital allocation, or advocating for market structure refinements that benefit the end investor, continuously enhancing the trading experience for our customers will remain our focus.
Risk management will also continue to be key. There is already a diverse user base utilizing derivatives in many sophisticated ways to grow and protect their assets. The options market is becoming more accessible to investors through technology and investor education, and products, such as ETFs that incorporate options strategies enable investors to leverage the risk management benefits of options through an accessible vehicle.
Outside of the traditional markets, we see an opportunity to bring the time-tested and trusted market structure of the TradFi market to the digital asset ecosystem. In our own digital business, we are launching trading and clearing in margin futures on Bitcoin and Ether, another step forward in our journey to bring more transparency and regulated solutions to the space. Tokenization is another trend to keep an eye on in the digital space. We are still in the early stages, but as more traditional institutions turn to tokenization, we could see new and innovative global trading efficiencies come to market.
What are your expectations for 2024?
Investors should be prepared for periods of increased volatility as they plan to employ strategies that protect and grow their assets. We are heading into 2024 with macro uncertainty lingering over the Fed as we wait to see just how dovish the Fed will be. And with an unprecedented number of people across the globe voting in key elections next year, geopolitical volatility will be top of mind. It is important investors understand the risks within their portfolios and are prepared for potential unexpected headwinds. Throughout all markets, the need for global liquidity and access to risk management tools will be critical.
