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Cboe to Launch New European Venue for Equity Derivatives – Regulation Asia

Clients will benefit from having more choice, and lower friction pricing models will promote greater liquidity, says Morgan Stanley’s David Russell.

Cboe Europe, a subsidiary of Cboe Global Markets, has announced plans to launch a new Amsterdam-based futures and options market on 6 September 2021.

Subject to regulatory approvals, the new exchange – Cboe Europe Derivatives – has already secured the support of market participants that will help contribute liquidity and order flow.

Supporting firms include ABN AMRO Clearing, Goldman Sachs, Morgan Stanley, All Options, Da Vinci Derivatives, DRW, Flow Traders, Liquid Capital Markets and Susquehanna International Securities.

Cboe’s pan-European clearing operator, EuroCCP, will provide clearing services for the new venue.

“Cboe Europe Derivatives plans to leverage Cboe’s global derivatives expertise and European equity trading and clearing footprint to bring a modern, on-screen market structure utilised in the US to Europe and to grow the region’s equity derivatives market overall,” Cboe said in a statement.

Under the US-style system, most bids and offers are available for traders to see on a computer screen on a central order book. In Europe, brokers would instead negotiate complex deals privately over the phone before sending them as a large block of trades to an exchange such as Deutsche Börse or Intercontinental Exchange.

“By taking a pan-European approach, Cboe Europe Derivatives will enable market participants to access a vibrant derivatives market through a single access point, creating efficiencies in trading and clearing,” the statement said.

Over the past 10 years, European exchange-traded derivative volumes have lagged global markets, said David Russell, Global Co-Head of Institutional Equities at Morgan Stanley.

industry data indicates that the notional value of deals traded in the US has risen from about USD 20 trillion to USD 140 trillion a year in the past decade. In Europe, this has remained largely unchanged at USD 20 trillion.

“We are supportive of this new initiative to bring further competition and innovation to this space,” Russell said, adding that clients will benefit from having more choice, and lower friction pricing models will promote greater liquidity.

Plans for the exchange involve offering trading in futures and options on six European equities indices, including contracts tracking blue-chip stocks in the UK, Germany, France and Switzerland, the FT reports.