Cboe Global Markets, Inc. CBOE is taking the world of options trading by storm. Not only did they recently launch options on Cboe Volatility Index Futures (VX Options), a new solution that offers more choices for expressing directional views and managing equity market volatility exposure, they also just announced at the HOOD Summit in Miami, FL on Oct. 17, that Robinhood customers would be able to trade index options
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00:00Today I have the pleasure of talking to Dave Howson, who is the global president of SIBO.
00:10Dave, thank you so much for your time.
00:12Pleasure to be here.
00:13You know, this is such an exciting event.
00:15We'll dive under all the stories that we're seeing around this event as well.
00:18But for the folks that might not be familiar, give us a quick brief overview of what SIBO
00:22does.
00:23So SIBO Global Markets is a global exchange company.
00:26We run 27 markets around the world, covering a variety of asset classes.
00:32That includes equities, options, futures, digital futures, and FX.
00:38But actually, we started 51 years ago as the originator of options.
00:43The ability for people to be able to define their own outcomes, to manage risk and manage
00:47volatility in their portfolios, started 51 years ago on the floor of the SIBO in Chicago.
00:53You know, I wonder who created the concept of options and if they ever thought it would
00:57get this much attention that it does in today's world, because we're at the Robin Hood Summit
01:02right in 2024.
01:04You now have a partnership with them with introducing your products on their platform.
01:09Tell me the importance of not just this partnership with Robin Hood, but also all the other retail
01:13brokerages that you have partnerships with.
01:15Why is it so important to have that?
01:17It's tremendously important to partner with all of our customers because an exchange is
01:21about building liquidity ecosystems.
01:24We've got the partnerships with our liquidity providers, the sell-side banks, and the retail
01:28brokerage platforms.
01:29When you look at the last five years, the growth and the utilization of retail participants
01:35of options has been absolutely tremendous.
01:38And so from our part, it's about helping with the education, helping with the learning of
01:42what the products can actually do for a customer to help manage volatility, to manage risk
01:48in their portfolio.
01:49So the utility of options, tremendously important, tremendously important that we then partner
01:54with retail brokerage platforms to really help the burgeoning usage of options through
02:01time.
02:02You know, Cibo is always innovating and one of the new products of innovations is options
02:07on VIX Futures.
02:08So for the folks watching at home, VIX Futures has been around for quite some time, but you
02:11guys on the 14th of October introduced options on VIX Futures.
02:15Tell me how traders are able to kind of utilize this.
02:18What does it mean to kind of have that?
02:20Yeah, at Cibo, we've got what we call a volatility toolkit.
02:24And why do we talk about the toolkit?
02:25Well, it's because we aim to provide utility to our customers throughout market cycles,
02:30because there's going to be market cycles, and throughout volatility regimes.
02:34So the ability to manage risk, to deploy different trading strategies, hedging strategies, income
02:40generation, systematic trading strategies, tremendously important.
02:45And so now to VIX Options on Futures, we've got the SPX options already.
02:50We've got our VIX options, which are the SEC regulated cash settled version, and those
02:55VIX Futures you mentioned.
02:57And so being able to access a futures venue, you need a different setup to accessing a
03:03securities venue.
03:05So VIX Options on Futures are on that futures venue.
03:08So that opens up a whole band of new potential participants, in particular, globally.
03:15So there's global participants now getting access to the ability to manage volatility
03:20exposure.
03:21And in particular, for these contracts, we're going to list them the first five days out,
03:25as well as the traditional explorations, which affords a much finer grained volatility management
03:31strategies to be deployed than you can do in a cash settled version.
03:34So it's about more users, more use cases coming to that volatility toolkit.
03:40You know, you mentioned the users, and I'm sure you dove into many Excel sheets in your
03:44years at SIBO and everywhere else.
03:46How is it like being at an event where you're seeing real humans that are using your products,
03:52walking around, engaging in them, learning their stories as well?
03:55What's it been like for you to kind of experience that outside of an Excel sheet?
04:01It's been inspiring.
04:02It's been humbling.
04:03It's been tremendous to think now, you know, I'm motivated for the next 10 years.
04:07It's incredible to look at the data.
04:10The data tells us that firms like Robinhood democratized access to the financial markets
04:15for a broad base of customers.
04:19Those retail brokerage houses have been doing it for many years.
04:21Yeah.
04:22But if you look at the data, four years, five years since the pandemic, time on their hands,
04:27sophisticated tools in their hands, some money from a stimulus check.
04:30We saw that growth.
04:31But we also saw an evolution of the sophistication from buying those meme stocks to upside call
04:38buying.
04:39So then in 2022, as the market ground down, the movement to index and ETF options, and
04:44in particular, those cash settled index options, tremendously important characteristic.
04:49And so that's the data.
04:51That's the story.
04:52But you come here and it comes to life.
04:54Yeah.
04:55You speak to people who say, you know, I picked it up, I learned, I went through some education
04:59and now they're evangelists themselves.
05:00They're here.
05:01I see little groups of people talking about this is how you do it.
05:03This is how you sell premium.
05:05This is how you do a covered call strategy.
05:07This is how you do a vertical spread.
05:09These strategies coming to life and people just really sharing that knowledge.
05:13It just really gives you great excitement for what the future holds.
05:16And I love that you said it kind of rejuvenates you.
05:17Right.
05:18So I've been saying that we have a live trading show and whenever we watch the stream, we
05:21always just see a number of, hey, 400 people are watching.
05:24But here I just met someone who watches the show and it was like, wow, these are real
05:28people behind the numbers.
05:29It gets you excited to do more because you're doing it for them.
05:32You're doing it for the traders to bring resources and tools in y'all's case to make sure they
05:36can take advantage of whatever their risk strategies are.
05:39So I think that's incredible.
05:40That journey is amazing because adding a cash settled index option allows you that broader
05:45based exposure to the market, whether it be sectors or the U.S. capital market, the fastest
05:50growing, the most consistently growing market in the world, S&P 500 index options to the
05:57SPX or XSP capability.
05:59That's really the demand driven piece that we get to really lean into.
06:04And I always sneak this in and all the SIBO interviews I do, tax advantages I think are
06:07huge as well.
06:08So folks that are watching, do your own due diligence to see how they can take advantage.
06:12I think that's one big, big key of trading SIBO products as well.
06:16Let's talk.
06:17Let's kind of continue to walk down memory lane.
06:18I've seen all the movies whenever I need to get excited about the markets as well, where
06:22there's madness on the trading pit.
06:24There's chaos there.
06:25I don't even know how you're fulfilling orders, by the way, no idea.
06:29But now we live in this virtual world where everyone's just able to execute with a touch
06:33of a finger.
06:34How has that kind of changed back in the day to today?
06:37Is it still madness in the Chicago pit?
06:40What's that like?
06:41It's a tremendously vibrant pit.
06:43We've got 330 kiosks and 10 trading pits.
06:48And the activity there is tremendously important to that ecosystem we talked about before.
06:53Those SPX options, about 20% of the volume trades on the floor itself.
06:58Wow.
06:59No way.
07:00SPX options, 40 to 50% trades on the floor itself.
07:04That's a lot higher than I expected, especially given the virtual world we live in.
07:08And it's interesting.
07:09We've evolved with the times, just like the retail brokerage platforms, we've evolved
07:12and now it's a hybrid interaction.
07:14So it's electronic and on the floor.
07:17Those floor trades are very large, very complicated trades that benefit from that human interaction,
07:23that human chaperoning and the liquidity curation, the price discovery that takes place on that
07:28floor is tremendously important to our customers.
07:31And the pandemic forced an experiment.
07:33It forced us to close the floor, which we did.
07:37But then the demand, the actual activity, even though we were able, thanks to the SEC's
07:42exemptive relief, we're allowed to electronify some of those activities.
07:45But actually, we weren't getting the flow and the liquidity curation that we were when
07:50the floor was open.
07:51So we reopened it in a brand new trading floor just across the road from the original one.
07:56Yeah.
07:57And it's incredible.
07:58Yeah.
07:59I mean, I think it's a great conversation, but also adapting in the COVID world.
08:00Okay.
08:01Here's what we can do.
08:02Here's how we can adjust.
08:03And you saw inflows of options increasing as well.
08:04And, you know, we've seen 51 years ago, SIBO created options.
08:09We then saw monthly options expiration.
08:12Then we saw a bit of weekly.
08:13Then we were introduced to Monday, Tuesday, Friday.
08:16Then we were introduced to daily expirations.
08:18Right.
08:19So zero DTEs as well.
08:20So much innovation happening.
08:22What excites you the most, you know, as we look ahead into the future of what trading
08:27could be like as you garner these partnerships, garner these relationships to introduce these
08:31new products.
08:32What excites you the most about the future?
08:34The first thing that excites me is actually the runway.
08:37The more users, more use cases that are coming to the market to our volatility toolkit is
08:42tremendous.
08:43And it's really about building functionality, capability and education resources to help
08:48that development, that runway of the products that we already have.
08:51And then as we just talked about, building around that core is really important to us
08:55because that liquidity power of that volatility complex is tremendous.
09:00So we added VIX options on futures, a more sophisticated variance future product as well
09:05in September.
09:06So adding products around that core to really diversify and enhance that core liquidity
09:11pool.
09:13Tremendously exciting.
09:14And then the progress of retail and the international demand for access to those U.S. capital markets.
09:20So all of that coming together, tremendously powerful and really excited about what data
09:25and insights that we're able to produce for our customers can do to really help with that
09:31journey.
09:32Yeah.
09:33Well, look, I appreciate your time here today.
09:34So much great, exciting announcements.
09:35Congratulations on all the hard work paying off.
09:37And I look forward to more future products that we can talk about.
09:40Yeah.
09:41Absolute pleasure.
09:42Thank you so much.
09:43That is Dave Howson, who is the global president at Cibo.