Cboe Abandons Spot Cryptocurrency Trading Amid Digital Asset Business Restructuring – Ledger Insights

The Chicago Board Options Exchange (Cboe) completed the acquisition of the cryptocurrency company ErisX at the end of 2021, subsequently establishing a new division named Cboe Digital. Recently, the company disclosed its decision to discontinue its cryptocurrency spot trading services and integrate derivatives trading and clearing with its principal operations, attributing the move to uncertain regulatory landscapes in the digital asset sphere.

The spot trading section handled a mere four cryptocurrencies, including Ether which the Securities and Exchange Commission (SEC) now views as a security.

Compared to Cboe’s overall business scale, the digital asset segment represents a fraction, albeit with disproportionately high running costs. Projected savings are forecasted to be between $2 million and $4 million for the current year, with annual normalized savings of $11 million to $15 million expected.

Regarding derivatives, Bitcoin’s open interest stands at approximately 400 contracts, which is notably smaller in magnitude than the CME’s 26,000 contracts.

Pending a regulatory examination, Cboe intends to merge its futures business related to digital assets with its traditional derivatives operations.

Although other alterations are in store, Cboe Digital will carry on the clearing of Bitcoin and Ether futures through Cboe Clear Digital, coordinating management efforts with Cboe Clear Europe.

Left unmentioned was the fact that Cboe Digital was not completely owned by Cboe. Towards the end of 2022, Cboe Digital disclosed a cohort of 13 minority investors, predominantly from the realms of cryptocurrency and proprietary trading. Amongst these investors were notable entities such as B2C2, Cumberland DRW, Jump Trading, StoneX, and Talos. Shortly before this disclosure, a substantial $460 million impairment on the investment in ErisX was reported.

“Incorporating digital asset derivatives and clearing into our current business segments allows us to draw upon our comprehensive global derivatives team’s expertise and maximizes the entire value of Cboe for our clients globally,” remarked David Howson, the Global President of Cboe. “Anticipation is high for a surge in demand for exchange-traded derivatives to attend to cryptocurrency risks, enhance capital efficiency, and optimize operational structures.”

In spite of these strategic adjustments, Cboe has not ceased to evolve its offerings, having introduced margined Bitcoin and Ether futures in January of this year.

Moreover, Cboe maintains a vested interest in the digital asset domain, exemplified by its investment in the Osaka Digital Exchange (ODX), the pioneer in Japan’s secondary market for digital securities, an endeavor initiated by SBI Holdings.