Cboe reorganization will merge or eliminate digital arms activities

The exchange is optimizing operations after acquiring ErisX on the eve of crypto winter and expects to save millions.

Equity exchange network Cboe Global Markets has announced plans to reorganize its digital assets trading operations, including eliminating its digital spot market.

Cboe said it will remove digital asset derivative trading from Cboe Digital and integrate it into its Global Derivatives and Clearing businesses. The Cboe Digital Spot Market will close in the third quarter of 2024. The exchange will move cash-settled Bitcoin and Ether futures contracts from the Cboe Digital Exchange to the Cboe Futures Exchange in the first half of 2025, subject to regulatory review and “certain corporate approvals.”

The Cboe Digital clearing arm, Cboe Clear Digital, will be “aligned” with Cboe Clear Europe under the unified leadership of Cboe Clear Europe president Vikesh Patel. The exchange said in a statement that:

“These changes are being made as part of Cboe's strategic review, taking into consideration the lack of regulatory clarity in the digital space, and are aligned with Cboe's longer term strategy.”

Cboe Digital offers Bitcoin (BTC), Bitcoin Cash (BCH), Ether (ETH), USD Coin (USDC) and Litecoin (LTC) products. The potential status of ETH as a security may be a factor in the current reorganization.

The exchange went on to note that it would enjoy significant savings from closing its digital spot trading arm. It called the $2-million to $4-million savings it would experience in 2024 an “immaterial impact” on its 2024 net revenue, but added that savings would reach $11 million to $15 million annually.

We expect to continue to see greater demand for exchange-traded [digital asset] derivatives to help manage crypto exposures, hedge risk and enhance capital and operational efficiencies, Cboe Global Markets global president David Howson said.

Source: Kaiko

Cboe greatly expanded its presence in the digital asset space through the May 2022 acquisition of ErisX, which operated a spot market, derivatives market and clearing platform and was transformed into Cboe Digital. The timing of that deal was unfortunate, as the crypto winter was just around the corner.

In August 2022, Cboe declared a $460 million goodwill impairment in its second-quarter earnings results due to its acquisition of ErisX. A goodwill impairment is the amount a company loses from buying an asset for a sum greater than the assets book value when the value of that asset later declines. In November 2022, Cboe Digital brought 13 investor partners into the business.