Cboe readies for European ETF expansion in 2024

Lida Eslami reveals the firm's vision for growing Europe’s ETF market

ETF Stream

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Cboe Europe, the leading operator of pan-European equity and derivatives trading and clearing services – including the largest pan-European stock exchange by market share – is readying itself to positively disrupt another aspect of the region’s market structure: the listings business.

As part of the group’s recently-announced global listings initiative – a first-of-its-kind global listings network across the group’s exchanges in North America, Europe and Asia-Pacific – Cboe will be introducing listings capabilities for companies on its UK and EU-based exchanges in the second half of 2024. This will be the first time the operator has competed for company listings in Europe and is also bringing renewed energy and focus to its existing ETF listings business.

As the year draws to a close and the company prepares for a groundbreaking 2024, ETF Stream speaks to Lida Eslami, who joined Cboe in July 2023 as its head of ETPs for EMEA, to review the growth of its European ETF business during 2023, its vision for growing Europe’s ETF market and provide an update on the group’s global listings initiative.

Firstly, can you review Cboe Europe’s ETF Listings business in 2023 and its plans for 2024?

We have had a good year with 16 new ETF listings, taking the total number of listings to 108. In December, we listed two new BlackRock ETFs on Cboe NL – our exchange based in Amsterdam – the iShares Japan Govt Bond UCITS ETF JPY (Acc) JGB1x and iShares Japan Govt Bond UCITS ETF USD Hedged (Acc) JGBUx. JGB1x is the first ETF listed on Cboe Europe traded in Japanese Yen, representing another milestone in our aim to become the leading pan-European ETF marketplace. We support listing and trading of ETFs in a wide range of trading currencies including MXN, SEK, SGD and ZAR among others.

We are authorised as a regulated market in the UK and the Netherlands allowing us to be the primary listing venue for ETFs and other ETPs, and we also make products available for trading that may have their primary listing elsewhere. On average, Cboe had a 2.5% share of on-exchange European ETP trading in 2023 to the end of November. When looking at total European ETF activity – including trades taking place on Cboe Europe and those reported to us through our APA reporting service – Cboe’s share was 13% for this period. By leveraging the strong and diverse participant base of our leading cash equities exchange, we are looking to aggressively grow our ETF trading volumes through a number of targeted initiatives during 2024.

What are some of the benefits Cboe Europe is bringing to the European ETF landscape?

In European ETFs, we can draw on both our leadership position in European equities as well as the strength of our global ETF listings business, which hosts close to 1,000 ETF listings. In European equities, we operate the largest pan-European stock exchanges by value-traded through exchanges in London and Amsterdam, with a market share of over 30% during continuous trading. We also operate Europe’s largest equities APA for reporting off-exchange transactions, which can also be used for reporting ETF trades. Our success in equities has been driven by our superior levels of customer service, diversity of trading mechanisms, user-choice in clearing and commitment to pursuing a pan-European approach, bringing investors to a robust and simplified European securities market free from national legacies.

Our customers can access more than 6,000 securities across 18 European markets, via one connection and a common rule book – helping us to attract a broad membership base including global investment banks, regional specialists, retail brokers and market making firms. We first launched an ETF listings marketplace in 2013 and are replicating many of the ingredients – specifically pan-European coverage, a more efficient post-trade structure and lower costs – that contributed to our success in equities. An ETF listing on Cboe Europe presents an opportunity for issuers to launch a single listing and cover 18 European markets simultaneously.

Europe’s ETF industry is often compared unfavourably to the US in terms of growth, liquidity and retail participation. How is Cboe addressing the structural inefficiencies that have contributed to this?

We have always believed that Europe’s ETF market structure can be improved and work closely with issuers and market participants to drive positive change. Europe’s ETF trading and liquidity is fragmented with providers having to list the same product across many exchanges to achieve pan-European coverage. In addition to splitting liquidity, this also creates a fragmented post-trade environment for clearing and settlement which is highly inefficient. When combined with the predominance of RFQ trading in European ETFs, new participants – particularly retail – have been deterred from entering this market and growth has stalled. At Cboe Europe, we’re addressing these weaknesses and seeking to expand the ETF market with a pan-European ecosystem – in terms of trading, clearing, and market data – that simplifies access to and reduces costs for those wishing to access this market. In addition, we have always supported a consolidated tape for shares and ETFs to democratise access to data and help to drive investment in these products. This year, we successfully advocated for - alongside a coalition of buy- and sell-side firms – the introduction of a real-time pre- and post-trade EU CT as part of the MiFIR review and this will come into reality from 2026.

Can you provide an update on Cboe’s global listings initiative and how this will help ETFs?

Our ultimate goal with Global Listings is to enable company and ETF listings across all our global exchanges – in the US, Canada, UK, Netherlands and Australia – and provide a seamless ‘intra-listing’ experience, offering companies and asset managers an easy route to greater international exposure.

As a group, we already host close to 1,000 ETF listings, from more than 110 issuers, and close to 80 company listings, which are primarily in Canada and focused on the purpose-driven innovation economy.

We took our first steps for this initiative in Europe this year by making Cboe-listed stocks in the US and Canada also available for trading in the UK and Netherlands. We have also been working diligently to secure the necessary approvals to add corporate listings capabilities in the first half of 2024. For ETFs in particular, our Global Listings initiative will help Cboe harmonise its services to issuers wherever they are, with the introduction of centralised account managers and global information hubs to better showcase issuers and inform investors.

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