to grow the pie by accessing new users and providing value-added market data products.
How will the expansion into ETFs cross over
with your core listed derivatives offering?
JD: We believe the new opportunities lie in
Europe when it comes to derivatives on ETFs.
The concept of an option on ETFs is a challenging one for European market participants – effectively it does not exist. We know that is a need
that can be addressed because options on ETFs
are strongly embraced in the US market. Whether
that will be approached through a US-type product, but with different characteristics that meet
European regulatory considerations, or through
index-related products that give participants similar exposures is to be determined. It is an interesting opportunity to explore.
Is the end-goal a CBOE European exchange?
JD: Bats already has an exchange registration. A
European registered investment exchange (RIE)
license is fairly flexible, and slightly different than
one in the US, which is more specific to commodities or securities trading. The RIE allows for
a broad range of products to be traded. It is now
a question of gauging market demand, speaking
to regulators about what other approvals are
required, and the new product process.
What was the rationale behind your
investments in CurveGlobal and Eris Exchange?
JD: With CurveGlobal, you have a group of banks
sitting around the table with us and the LSE with
How much of an opportunity will expanding in
market data be?
JD: In terms of market data and non-transactional revenue for CBOE, we stand to grow from 30%
of total net revenues on a standalone basis to 40%
in combination with Bats. A big part of that is
Bats’ strong market data expertise – about half of
Bats revenue is non-transactional. As investment
strategies become more complex and more global,
market data helps participants’ back-test strategies around global macro trading. This also
relates to our engagement with ETFs as market
data drives products such as ETFs.
Bats has had a tremendous amount of success
with its pricing strategy on market data. We don’t
want to turn away users because they feel the cost
of market data is too high. It would be a disservice if we do that. Our expected approach will be
“We plan to break down
those barriers by having one
underlying, our marketplaces
across the world.”
THE BIG INTERVIEW | JOHN DETERS, CBOE