Cboe Doubles Down on its Data-Driven Approach

Cboe is doubling down on its data-driven approach to FX matching as it looks to ramp up its NDF offering and build out its new analytics platform.

Profit & Loss has previously reported on Cboe FX’s decision to change how it manages liquidity, shifting away from a qualitative approach towards a much more quantitative one. Senior staff at the platform claim that this change has been a success, pointing to the fact that in 2018 and 2019, Cboe FX recorded its two highest years of average daily notional trading volume.

Now the platform provider is looking to build out its NDF business, and is counting on the fact that this data-driven approach will help it to do so.

Cboe FX has been looking to build out its NDF business since 2017, but thus far has had little to show for its efforts. However, at a press briefing in New York on Thursday, senior figures at the exchange group claimed progress is now being made on this front, saying that in 2019 it onboarded new market participants and prime brokers to Cboe SEF, which offers streaming liquidity in eight NDF pairs.

Bryan Harkins, Cboe

When pressed on how Cboe can win market share in NDFs against the incumbent platform for these products, EBS, and other trading venues also in the process of building out NDF offerings, Bryan Harkins, Cboe’s co-head of markets, cited two key differentiators.

“We’re offering both a SEF market as well as an off-SEF market,” he said, before adding shortly after: “EBS offers off-SEF and we think with Dodd-Frank rules and uncleared margin, that’s going to push people more towards a regulated product offering, so that’s more of a longer-term bet by Cboe.”

Harkins continued: “And then, frankly, we’re betting on ourselves. One of the reasons we’ve won business in the spot market is through superior data analytics and our ability to provide a superior liquidity solution for our clients, we think we can do that better than our competition.”

Indeed, Harkins said that within Cboe as a whole, the FX business has been a leader in terms of utilising data and analytics as a way to “drive superior client outcomes”, claiming that it was these analytics which helped drive a significant spike in full amount trading on Cboe FX last year.

Moreover, now it seems that the exchange group is trying to roll out this approach more broadly across the various trading venues that it operates with the planned launch of a new data analytics platform this year.

Chris Isaacson, Cboe

Chris Isaacson, executive vice president and COO of Cboe, explained that the new data analytics platform will be designed to help the firm understand how its customers are using its products and services and enable it to identify opportunities for new product development. It will also, he said, enable Cboe to provide clients with data that can yield actionable trading insights, helping them to make more informed trading decisions by identifying new opportunities and potential optimisations of their trading.

“This is frankly just us getting smarter about how our customers are using our products and our markets so that we can go to them with data to help them inform their trading strategies and provide them real intelligence. So this is a real focus for us internally,” he said.

Isaacson added that the metrics of success for this new analytics platform will not be the amount of data that it is able to directly sell to market participants, but rather increased trading activity on its various platforms as a result of the insights gleaned from the data.

He further commented: “This goes along with all the platform migrations we’ve done. We’ve been focused on our trading platforms for the past three years and now we’re focused on the data platform to mine the data coming off those trading platforms.”

Galen Stops

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