Your alternative access to more than 1,000 ETFs and warrants for your portfolio

There has never been a better time to be an investor…are you ready for it? More information available, more choice and variety and more access points than ever point. Everything has changed in the past few decades and it’s a brand new world. Amongst those changes is the arrival in Australia of an alternative securities exchange in the form of Cboe.

It's an open access market for executing trades on a range of listed products, such as ETFs, warrants, futures and volatility products – you might already be using it without realising. After all, access is as simple as using your existing trading platform to select a product like an ETF and purchase just as you normally would.

As it happens, Cboe is ‘nothing new’ in the global scheme of things even if it’s a relatively new entrant to the Australian market. It launched on the Australian market in 2011 as Chi-X and was acquired by Cboe Global Markets in 2021. In fact, it’s the largest options exchange in the world.

But what does this all mean for you?

More competition in the market forces innovation, better tech and cost efficiencies – and that means investors will be better off in the long run.

To find out more, I spoke to Emma Quinn, President of Cboe Australia to find out how it all works, the government legislation that is lending itself to greater competition in this space, and why she views Cboe as the ‘Taylor Swift’ of exchanges (yes, avid Swifties will already have found those references, bonus points if you can list them all in the comments). She also shared the exciting future ahead for listings.

Why is more competition important when it comes to securities exchanges in Australia and how can the government’s draft legislation around extended powers for the RBA, ASIC and the ACCC support this?

It all comes down to improving value for investors. Competition drives businesses to create clear value propositions for customers, driving innovation, choice and cost saving. By offering a diverse product set, robust proprietary technology and a proven track record of operational reliability, Cboe is a nimble, high-quality alternative to the incumbent with a proven track record, both locally and globally.

From a cost perspective, we’ve delivered a saving to Australian investors approximately half a billion dollars ($500 million) in fee savings since the Cboe/Chi-X market launch. Cboe is also at the forefront of product development in Australia and was the first exchange to gain regulatory approval to list cryptocurrency ETFs, and did so, in 2022.

The rulemaking and arbitration powers granted to ASIC and ACCC under the Competition in Clearing and Settlement legislation seek to provide greater certainty for the expectations of ASX relating to Equities Clearing (CHESS) and support the emergence of a committed competitor in the post-trade space.

Cboe Australia has been a strong supporter of this process, legislation, rules and powers. We appeared at the Parliamentary Joint Committee in June 2023 and provided public submissions to this process through various consultations. This is an important milestone that provides a potential emergent competitor, like Cboe Australia, greater certainty of the conditions under which it might be able to compete with the vertically integrated incumbent monopoly.

With limited choice for market participants, the Australian market only stands to benefit from increased competition.

Where do you see the biggest market opportunity for Cboe and why?

Cboe is the only truly global exchange operator and our ability to leverage the infrastructure and resources of our global network is unrivalled.

We have a 50-year legacy of driving innovation and building trusted markets around the world. We look to bring expanded products and services to the Australian market, providing investors with a greater choice of investable products, and ultimately, a better trading experience. Just one example, our proprietary data and analytics products can help investors better navigate their investment journey.

Last year, you mentioned the potential for Australian companies to IPO directly on Cboe at some point in 2024. Is this still likely and what timing is Cboe looking at?

We are looking to launch corporate listings next year, which will complement our broader listing business of more than 1,000 warrants and exchange-traded funds, which include ETFs on equities, fixed income and cryptocurrencies we already host. 

Cboe will bring efficiency and a swift go-to-market strategy for companies wishing to IPO and doing so – continue to expand the investment universe for Australian investors.

What are the advantages to companies of using Cboe to IPO?

Similar to our Funds business, we are committed to providing an unmatched listing experience through customer-centric service and a seamless approach to global account management. From legal and regulatory assistance, business development, and 24/7 operational support, to our innovative liquidity provision program, listing with Cboe is a partnership in every way.

Once our full global listings capability is up and running with Australia, North America and Europe, we will have the ability to host corporates across our five global listings exchanges. Issuers on Cboe will have the unique ability to ‘intra-list’ across our global exchange network, accessing capital and liquidity across some of the world’s largest equities markets.

Cboe has a market share of 21.1%. What is Cboe’s ongoing strategy to increase market share?

Our success is driven not only by large-scale or high-frequency trading but by our diverse client base. We prioritise market enhancements that improve trade execution outcomes for all investors.

We are seeing stronger participation with the retail and institutional investor activity within our integrated central limit order book. Cboe Australia sees a higher percentage of retail trade execution, in terms of exchange turnover value, compared to the ASX.

How does Cboe balance innovation and listing of innovative products, like spot bitcoin ETFs, with the regulatory environment?

We have a customer-driven focus, committed to bringing new products and services to the market that solve problems and meet the needs of a diverse range of investors. We work closely with customers and regulators every step of the way to ensure that our innovations are bringing transparent opportunities that investors genuinely need and would benefit from.

Cboe is a Tier 1 exchange and operates in a highly regulated market, our focus is delivering innovative outcomes for investors that are aligned with the highest regulatory standards.

What trends are you currently seeing across trading on Cboe? Has this changed compared to previous years?

1) Growth of retail trading

The retail trading experience has never been better. Investors today have access to more news and information, trading tools and zero-cost commissions. Advances in broker platform technology have levelled the playing field. The best retail platforms of today have new tools and functionality that were not available to retail investors even five years ago. It has democratised the markets and empowered investors like never before. And within that retail participation, we’re seeing more growth in APAC and the US than in Europe.

2) The growth of options

Generally speaking, options are a tool that can remove volatility from a portfolio while helping preserve relative returns. As retail investors are becoming more sophisticated, we are seeing many turn to options, and in particular, defined outcome investing, which systematically uses certain options-based strategies to achieve a specific investment objective.

Cboe has developed nearly 70 strategy benchmark indices that track the performance of options-based investment strategies. Many of these are now replicated with ETF options that overlay one of these specific strategy performance benchmarks. These products enable investors to incorporate sound risk management strategies into their investment objectives to protect their assets and invest for the long term.

3) More ETF listings, more choice

ETFs also continue to be the vehicle of choice for investors more broadly. Of the 36 ETFs listed in Australia this year, Cboe has listed eight of them. 

Assets Under Management of Australian ETFs ticked through the $200 billion milestone in June 2024. We can expect this growth trajectory to continue as active managers list funds.

In 2023 there were more active ETFs listed than index ETFs, and the trend continues in 2024. More and more boutique managers and global powerhouses are choosing to enter the listed space. Large index fund managers are also constantly adding to the ETF growth in Australian markets with innovative ideas, expanding the choice for Australian investors.

Just for fun: Which celebrity or famous person do you think Cboe embodies?

Taylor Swift is known for her versatility, influence, and ability to reinvent herself while maintaining a strong connection with her audience. Similarly, Cboe is versatile in its offerings, influential in the financial markets, and continually innovates to stay relevant.

Want a taste of the ETFs you’ll find on Cboe?

If you’re looking for a snapshot, the Livewire team have interviewed some of the incredible fund managers who have listed on Cboe across the year. You can read interviews with:

• Monochrome’s Chief Operating Officer Bridget Nichols discussing Bitcoin
• Lazard’s Warryn Robertson on investments with inflation-protected revenues, high margins and high free cash flow
• Talaria Asset Management’s Chad Padowitz on what real returns are and how to deliver income in any cycle
• BlackRock’s Tamara Haban-Beer Stats on factor investing