TradeTech FX USA 2022: Cboe FX looks to diversify its product offering, says head of FX Sales
We caught up with Ben Leit, global head of FX & FI sales at Cboe, to uncover emerging trends in the FX industry and learn more about the bourse operator’s recent initiatives.
For several financial markets, including the foreign exchange arena, technological advancements have been a key driver behind the transformation in how things are done. We asked Ben how Cboe FX kept up with technology disruptions in the industry over the last few years?
The industry veteran, whose career in the FX dates back to 2009, said the technology has been at the core of how Cboe operates and how they maintain their competitive edge in a challenging, cutthroat environment.
To be more specific, he highlighted how vital technology has become to enhance execution outcomes for their investors. Ben also told FinanceFeeds that they have been looking for opportunities to lower the barriers for entry for clients wishing to adopt advanced agency solutions in the FX spot market.
“For us, it’s about continuing to innovate. And when it comes to our technology, it’s about continuing to build and give our clients the ultimate amount of execution options. So what we’ve done over the past year is just continuing to launch new order types and ways for clients to get in and out of positions. I’d say execution options are a big focus since we have a diverse client set that all require different ways to access the market.”
We also asked Mr. Leit how Cboe is navigating such a highly fragmented ecosystem and allows FX market participants to best source liquidity and get the best execution.
Ben first explained that the trade execution had undergone rapid changes. Then, he elaborated further on how FX trading is turning more electronic as participants are becoming more diverse, and trading venues are multiplying.
Ben added that Cboe has set out plans to move into the fixed income markets with the launch of a new US Treasuries trading platform. Subject to regulatory approvals, the new interdealer venue is expected to launch in the second quarter to mark Cboe’s first cash US fixed income product. He explains that it leverages their matching protocol technology to allow for large order risk transfer with low impact alongside capabilities in liquidity and analytics.
He also pointed out that traders are increasingly adopting multi-asset strategies and that’s why they are looking to offer them access to the full range of investment products.
“Our client base in FX and rates are similar in many ways in terms of asset classes. So for us, we were actually keeping on that theme of being able to access multiple markets. We want the clients to have access to those options.”
Unleashing the potential of NDFs
Turning to crypto, Cboe’s sales executive spoke about their actual interest in the nascent sector and recent updates surrounding a bid to acquire ErisX.
Firstly, Ben clarified that the ErisX takeover hadn’t been completed yet, but it is expected to close in the first half of 2022. He also highlights how the deal is a great expansion opportunity and fully aligns with where customers are asking to operate.
ErisX, which is backed by a diverse group of industry-leading financial institutions, was the first regulated digital asset exchange to offer both spot and futures markets on the same platform. As such, the pending buyout gives Cboe, which was the first US exchange to launch bitcoin futures in 2017 before later shuttering the product, a new set of crypto derivatives offerings, as well as spot crypto trading.
Mr Leit added that the Cboe FX business is also looking at potentially launching a crypto NDF product, describing that as an important step in allowing professional investors to increase their presence in crypto.
“Again, there’s an attractiveness to that for institutions that have issues physically settling cryptos. So having a cash-settled product is attractive and we’ll look to leverage our staff to offer that.”
Finally, FinanceFeeds Editor in Chief Nikolai Isayev asked Ben Leit what he expects for the industry in the future as 2022 gets underway.
Once again, he reiterated the importance of non-deliverable forwards (NDFs) in driving both traditional and crypto markets’ electronification, in which increasing trading volume is likely to be seen. The question is whether the forces that have driven that growth will continue to do so. Also, it’s not always a smooth journey, he notes, as crypto NDFs have some way to go before it can be considered mature.
“NDFs is a huge thing. So in terms of the trend there, NDFs is becoming a more electronic market, which is great for us and great for our clients. It’s becoming more automated, and people are now able to price in a streaming, electronic fashion, essentially, in both Asia and Latin markets. Also, clients are now able to automate risk management, which is a great thing for building liquidity on an ECN product like ours. So I say, continued electronification of NDFs would make it look and feel a lot more like spot, a theme that will definitely continue to develop over the next three to five years,” he concluded.