Key Points
- Cboe Global Markets plans to restructure its digital asset trading operations, including shutting down its digital spot market.
- The exchange will transition cash-settled Bitcoin and Ether futures contracts from Cboe Digital Exchange to Cboe Futures Exchange by 2025.
Cboe Global Markets, an equity exchange network, has revealed plans to overhaul its digital asset trading operations. This includes the removal of its digital spot market.
The exchange intends to extract digital asset derivative trading from Cboe Digital and incorporate it into its Global Derivatives and Clearing businesses. The Cboe Digital Spot Market is set to cease operations in the third quarter of 2024.
Transition of Bitcoin and Ether Futures Contracts
The company is also planning to transfer cash-settled Bitcoin and Ether futures contracts from the Cboe Digital Exchange to the Cboe Futures Exchange. This change is slated for the first half of 2025 and is subject to regulatory scrutiny and certain corporate approvals.
Cboe Clear Digital, the clearing arm of Cboe Digital, will align with Cboe Clear Europe under the leadership of Cboe Clear Europe president Vikesh Patel. The exchange stated that these changes are part of a strategic review considering the lack of regulatory clarity in the digital realm, aligning with Cboe’s long-term strategy.
Impact on Digital Asset Offerings
Cboe Digital currently provides Bitcoin (BTC), Bitcoin Cash (BCH), Ether (ETH), USD Coin (USDC), and Litecoin (LTC) products. The potential classification of ETH as a security may influence the ongoing reorganization.
The exchange also noted substantial savings from discontinuing its digital spot trading division. It anticipates savings of $2 million to $4 million in 2024, which it considers an “immaterial impact” on its 2024 net revenue. However, these savings could escalate to $11 million to $15 million annually.
Cboe Global Markets global president David Howson anticipates a growing demand for exchange-traded digital asset derivatives to manage crypto exposures, mitigate risk, and boost capital and operational efficiencies.
Through the May 2022 acquisition of ErisX, Cboe significantly increased its footprint in the digital asset space. ErisX operated a spot market, derivatives market, and clearing platform and was later transformed into Cboe Digital. The acquisition timing was unfortunate as the crypto winter was imminent.
In August 2022, Cboe reported a $460 million goodwill impairment in its second-quarter earnings results due to its acquisition of ErisX. Goodwill impairment refers to the loss a company incurs when it purchases an asset for more than its book value, and the asset’s value subsequently declines. In November 2022, Cboe Digital introduced 13 investor partners to the business.