Cboe’s Reorg: Merging or Eliminating Digital Arm’s Activities

Cboe Global Markets, an equity exchange network, has announced plans to reorganize its operations in the digital assets trading market. As part of this reorganization, Cboe will be eliminating its digital spot market and integrating digital asset derivative trading into its Global Derivatives and Clearing businesses. The closure of the Cboe Digital Spot Market is expected to take place in the third quarter of 2024. The exchange intends to move cash-settled Bitcoin and Ether futures contracts from the Cboe Digital Exchange to the Cboe Futures Exchange in the first half of 2025, pending regulatory review and corporate approvals.

Cboe Clear Digital, the clearing arm of Cboe Digital, will now be aligned with Cboe Clear Europe under the leadership of Cboe Clear Europe president Vikesh Patel. According to Cboe, these changes are being made in light of the lack of regulatory clarity in the digital space and are in line with the company’s long-term strategy. Cboe Digital currently offers various products, including Bitcoin, Bitcoin Cash, Ether, USD Coin, and Litecoin.

It is speculated that the potential status of Ether as a security may have influenced the decision to reorganize. Closing the digital spot trading arm is expected to result in significant cost savings for Cboe. While the projected savings for 2024 are estimated at $2 million to $4 million, the annual savings are anticipated to be $11 million to $15 million. Cboe Global Markets’ global president, David Howson, expressed confidence in the continued demand for exchange-traded digital asset derivatives, citing their usefulness in managing crypto exposures, hedging risks, and improving capital and operational efficiencies.

Cboe’s expansion into the digital asset market was boosted by its acquisition of ErisX in May 2022. ErisX operated a spot market, derivatives market, and clearing platform and was transformed into Cboe Digital. The timing of this acquisition proved unfortunate, as the crypto winter soon followed. In August 2022, Cboe reported a $460 million goodwill impairment in its second-quarter earnings due to the decline in the value of ErisX. In November 2022, Cboe Digital welcomed 13 investor partners to the business.