00:00Today I have the pleasure of talking to Dave Howson, who is the global president of SIBO.
00:10Dave, thank you so much for your time.
00:12Pleasure to be here.
00:13You know, this is such an exciting event.
00:15We'll dive under all the stories that we're seeing around this event as well.
00:18But for the folks that might not be familiar, give us a quick brief overview of what SIBO
00:22does.
00:23So SIBO Global Markets is a global exchange company.
00:26We run 27 markets around the world, covering a variety of asset classes.
00:32That includes equities, options, futures, digital futures, and FX.
00:38But actually, we started 51 years ago as the originator of options.
00:43The ability for people to be able to define their own outcomes, to manage risk and manage
00:47volatility in their portfolios, started 51 years ago on the floor of the SIBO in Chicago.
00:53You know, I wonder who created the concept of options and if they ever thought it would
00:57get this much attention that it does in today's world, because we're at the Robin Hood Summit
01:02right in 2024.
01:04You now have a partnership with them with introducing your products on their platform.
01:09Tell me the importance of not just this partnership with Robin Hood, but also all the other retail
01:13brokerages that you have partnerships with.
01:15Why is it so important to have that?
01:17It's tremendously important to partner with all of our customers because an exchange is
01:21about building liquidity ecosystems.
01:24We've got the partnerships with our liquidity providers, the sell-side banks, and the retail
01:28brokerage platforms.
01:29When you look at the last five years, the growth and the utilization of retail participants
01:35of options has been absolutely tremendous.
01:38And so from our part, it's about helping with the education, helping with the learning of
01:42what the products can actually do for a customer to help manage volatility, to manage risk
01:48in their portfolio.
01:49So the utility of options, tremendously important, tremendously important that we then partner
01:54with retail brokerage platforms to really help the burgeoning usage of options through
02:01time.
02:02You know, Cibo is always innovating and one of the new products of innovations is options
02:07on VIX Futures.
02:08So for the folks watching at home, VIX Futures has been around for quite some time, but you
02:11guys on the 14th of October introduced options on VIX Futures.
02:15Tell me how traders are able to kind of utilize this.
02:18What does it mean to kind of have that?
02:20Yeah, at Cibo, we've got what we call a volatility toolkit.
02:24And why do we talk about the toolkit?
02:25Well, it's because we aim to provide utility to our customers throughout market cycles,
02:30because there's going to be market cycles, and throughout volatility regimes.
02:34So the ability to manage risk, to deploy different trading strategies, hedging strategies, income
02:40generation, systematic trading strategies, tremendously important.
02:45And so now to VIX Options on Futures, we've got the SPX options already.
02:50We've got our VIX options, which are the SEC regulated cash settled version, and those
02:55VIX Futures you mentioned.
02:57And so being able to access a futures venue, you need a different setup to accessing a
03:03securities venue.
03:05So VIX Options on Futures are on that futures venue.
03:08So that opens up a whole band of new potential participants, in particular, globally.
03:15So there's global participants now getting access to the ability to manage volatility
03:20exposure.
03:21And in particular, for these contracts, we're going to list them the first five days out,
03:25as well as the traditional explorations, which affords a much finer grained volatility management
03:31strategies to be deployed than you can do in a cash settled version.
03:34So it's about more users, more use cases coming to that volatility toolkit.
03:40You know, you mentioned the users, and I'm sure you dove into many Excel sheets in your
03:44years at SIBO and everywhere else.
03:46How is it like being at an event where you're seeing real humans that are using your products,
03:52walking around, engaging in them, learning their stories as well?
03:55What's it been like for you to kind of experience that outside of an Excel sheet?
04:01It's been inspiring.
04:02It's been humbling.
04:03It's been tremendous to think now, you know, I'm motivated for the next 10 years.
04:07It's incredible to look at the data.
04:10The data tells us that firms like Robinhood democratized access to the financial markets
04:15for a broad base of customers.
04:19Those retail brokerage houses have been doing it for many years.
04:21Yeah.
04:22But if you look at the data, four years, five years since the pandemic, time on their hands,
04:27sophisticated tools in their hands, some money from a stimulus check.
04:30We saw that growth.
04:31But we also saw an evolution of the sophistication from buying those meme stocks to upside call
04:38buying.
04:39So then in 2022, as the market ground down, the movement to index and ETF options, and
04:44in particular, those cash settled index options, tremendously important characteristic.
04:49And so that's the data.
04:51That's the story.
04:52But you come here and it comes to life.
04:54Yeah.
04:55You speak to people who say, you know, I picked it up, I learned, I went through some education
04:59and now they're evangelists themselves.
05:00They're here.
05:01I see little groups of people talking about this is how you do it.
05:03This is how you sell premium.
05:05This is how you do a covered call strategy.
05:07This is how you do a vertical spread.
05:09These strategies coming to life and people just really sharing that knowledge.
05:13It just really gives you great excitement for what the future holds.
05:16And I love that you said it kind of rejuvenates you.
05:17Right.
05:18So I've been saying that we have a live trading show and whenever we watch the stream, we
05:21always just see a number of, hey, 400 people are watching.
05:24But here I just met someone who watches the show and it was like, wow, these are real
05:28people behind the numbers.
05:29It gets you excited to do more because you're doing it for them.
05:32You're doing it for the traders to bring resources and tools in y'all's case to make sure they
05:36can take advantage of whatever their risk strategies are.
05:39So I think that's incredible.
05:40That journey is amazing because adding a cash settled index option allows you that broader
05:45based exposure to the market, whether it be sectors or the U.S. capital market, the fastest
05:50growing, the most consistently growing market in the world, S&P 500 index options to the
05:57SPX or XSP capability.
05:59That's really the demand driven piece that we get to really lean into.
06:04And I always sneak this in and all the SIBO interviews I do, tax advantages I think are
06:07huge as well.
06:08So folks that are watching, do your own due diligence to see how they can take advantage.
06:12I think that's one big, big key of trading SIBO products as well.
06:16Let's talk.
06:17Let's kind of continue to walk down memory lane.
06:18I've seen all the movies whenever I need to get excited about the markets as well, where
06:22there's madness on the trading pit.
06:24There's chaos there.
06:25I don't even know how you're fulfilling orders, by the way, no idea.
06:29But now we live in this virtual world where everyone's just able to execute with a touch
06:33of a finger.
06:34How has that kind of changed back in the day to today?
06:37Is it still madness in the Chicago pit?
06:40What's that like?
06:41It's a tremendously vibrant pit.
06:43We've got 330 kiosks and 10 trading pits.
06:48And the activity there is tremendously important to that ecosystem we talked about before.
06:53Those SPX options, about 20% of the volume trades on the floor itself.
06:58Wow.
06:59No way.
07:00SPX options, 40 to 50% trades on the floor itself.
07:04That's a lot higher than I expected, especially given the virtual world we live in.
07:08And it's interesting.
07:09We've evolved with the times, just like the retail brokerage platforms, we've evolved
07:12and now it's a hybrid interaction.
07:14So it's electronic and on the floor.
07:17Those floor trades are very large, very complicated trades that benefit from that human interaction,
07:23that human chaperoning and the liquidity curation, the price discovery that takes place on that
07:28floor is tremendously important to our customers.
07:31And the pandemic forced an experiment.
07:33It forced us to close the floor, which we did.
07:37But then the demand, the actual activity, even though we were able, thanks to the SEC's
07:42exemptive relief, we're allowed to electronify some of those activities.
07:45But actually, we weren't getting the flow and the liquidity curation that we were when
07:50the floor was open.
07:51So we reopened it in a brand new trading floor just across the road from the original one.
07:56Yeah.
07:57And it's incredible.
07:58Yeah.
07:59I mean, I think it's a great conversation, but also adapting in the COVID world.
08:00Okay.
08:01Here's what we can do.
08:02Here's how we can adjust.
08:03And you saw inflows of options increasing as well.
08:04And, you know, we've seen 51 years ago, SIBO created options.
08:09We then saw monthly options expiration.
08:12Then we saw a bit of weekly.
08:13Then we were introduced to Monday, Tuesday, Friday.
08:16Then we were introduced to daily expirations.
08:18Right.
08:19So zero DTEs as well.
08:20So much innovation happening.
08:22What excites you the most, you know, as we look ahead into the future of what trading
08:27could be like as you garner these partnerships, garner these relationships to introduce these
08:31new products.
08:32What excites you the most about the future?
08:34The first thing that excites me is actually the runway.
08:37The more users, more use cases that are coming to the market to our volatility toolkit is
08:42tremendous.
08:43And it's really about building functionality, capability and education resources to help
08:48that development, that runway of the products that we already have.
08:51And then as we just talked about, building around that core is really important to us
08:55because that liquidity power of that volatility complex is tremendous.
09:00So we added VIX options on futures, a more sophisticated variance future product as well
09:05in September.
09:06So adding products around that core to really diversify and enhance that core liquidity
09:11pool.
09:13Tremendously exciting.
09:14And then the progress of retail and the international demand for access to those U.S. capital markets.
09:20So all of that coming together, tremendously powerful and really excited about what data
09:25and insights that we're able to produce for our customers can do to really help with that
09:31journey.
09:32Yeah.
09:33Well, look, I appreciate your time here today.
09:34So much great, exciting announcements.
09:35Congratulations on all the hard work paying off.
09:37And I look forward to more future products that we can talk about.
09:40Yeah.
09:41Absolute pleasure.
09:42Thank you so much.
09:43That is Dave Howson, who is the global president at Cibo.
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