Road Trip to IDX: Cboe's Saroukhanov Discusses Growth in Europe's Options Markets

Iouri Saroukhanov, the Head of European Derivatives at Cboe Global Markets, checks in from the International Derivatives Expo to provide an update on the the trading landscape for options and other derivatives. Saroukhanov shared some of the highlights from a panel discussion he participated in at IDX about the Future of Options Markets in Europe. To that end, Saroukhanov also outlines some of the key points from a white paper titled "Policy Recommendations to Unlock Retail Participation in Europe's Options Markets"  that was published earlier this week by Cboe.

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Transcript

(Note: this transcript was created using AI. It has not been edited verbatim.)

Sean McMahon  0:07  
Hello everyone, and welcome to the Modern Money SmartPod. I'm your host, Sean McMahon, and today I'm coming to you from the International Derivatives Expo hosted by the Futures Industry Association. We're here in London. We're on the sidelines of this event, and we're chatting with some of the leading experts in the financial services industry. Joining me right now is Iouri Saroukhanov, head of European derivatives for Cboe Global Markets. Iouri, how are you doing today?

Iouri Saroukhanov  0:32  
 I'm great. Thank you very much. And thank you very much for having me on your podcast.

Sean McMahon  0:36  
It's wonderful to have you here, you know. So the first day of IDX is just about half over has been treating you so far?

Speaker 1  0:42  
It's been amazing. IDX is always a great event to come to. First of all, the breadth of people that you get here, the breadth of clients that you get here, it's a great place to meet everyone in the same place, and, of course, the client engagement and the follow ups that go with it. So we have had specific meetings with people, people coming up to the booth trying to figure out, figure out what cibo is all about, whether it's European us, derivatives, and everything else that we're doing around the cash equity markets as well. 

Sean McMahon  1:08  
So what are some of the trends you're hearing out there on the trade show floor? Any hot topics? 

Speaker 1  1:13  
Well, one of the things that, of course, is discusses is they given the current backdrop of geopolitical changes and, and you know, whether it really is the end of us exceptionalism and and what that means for the European markets overall, and specifically for the European derivatives market. We certainly have been seeing a bit of a trend of more engagement around the European derivatives and interest of how to access the market, and how do we combine CBA into this equation, and how cway facilitates the access. 

Sean McMahon  1:40  
I understand. So you just wrapped up your panel, you know, the future of options in Europe. And, you know, I sat in on part of that, and it was interesting, kind of hear the different perspectives that were shared. So what can you say? What's your take on the future of options in Europe?

Speaker 1  1:53  
That's that was a very interesting panel. And sitting right next to some of the industry veterans and talking about the European markets was, it was amazing, of course, looking at the future, you can't go look at the future without looking back and seeing a bit of history. So we did start by revisiting, okay, so how was the market developing? What was behind the US, growth of the of the derivatives market, and why did Europe really stagnate over the last, let's say decade, decade and a half, some of the main things that were identified, in my opinion, were issues around the fragmentation of European markets and not being able to look at Europe as a whole when you compare to the US, where you've got a one country success, lack of competition in European markets as well. So if you think about, I mean, it's kind of like your children, you stop counting in months, and you start counting in years. Say, in the US, you stop counting exchange one by one. You start counting them in how many tons of exchanges there are. So you have this competition that promotes best execution practices. You have this competition that brings also innovation around the product and the functionalities. And at times it is lacking in Europe. But you know, there is a flip side of that and a positive signs. I already mentioned, there's more interest in the European markets than they were even, even a couple of years ago, and people looking at the ways to access it. The issue that was also discussed is around the screen, liquidity and opaqueness of the European markets the equator were given that that close to 60% of the options market in Europe is trading in OTC style block market, so it doesn't really hit the central limit order book. And therefore, you know, we also discussed what is the impact of the screen liquidity versus off screen liquidity? I believe it's a shop window. So, so when anyone who is new to the European market looks at the European markets, they want to be seeing that vibrant, vibrant activity that is visible to everyone, so not something that just goes up in the block. So there's something that we certainly advocate for and something that we want to see in the future of the European options.

Sean McMahon  3:57  
So any ideas on how we're going to get there?

Speaker 1  4:01  
 I think everyone agrees that retail is key to building this green liquidity, certainly at the early stages. And you know, if you also think about what's happening in Europe as well around the European Commission's thinking, or around SIU and how to get the retail participant more broadly involved in European capital markets. So there's a multiple issues that we can we can help and tackle there. There's a there. We can tackle the education around the derivatives. And CBO is lucky enough to have option Institute by its side with 40 years of history of educating the retail around the options. And we bring that to Europe as well. So we've got education coming out in local languages around countries in Europe already, and some of that is done in partnership with the retail brokers. And then we also, through our recently released paper around the Exchange Traded derivatives and how to promote retail participation, have given some advice on the on the regulatory front as well, around the policies that are currently active in Europe.

Sean McMahon  5:02  
It seems like there's, you know, a lot of, you know, obviously, constituents from different markets who are really trying to solve this, right? And trying to, you know, bring them in the panel they had kind of the gap between the volumes, between US and Europe, and trying to close that gap. So what else are you in the team at SIBO working on? Or what else you seen in the markets these days?

Speaker 1  5:20  
Sure, and what else we're seeing and, you know, and it's one of the topics that was also discussed is, is the drive to, to move the OTC, like the true OTC volume, onto the exchanges. It comes with, with some improvements on capital efficiency and execution efficiency. So definitely, the willing is there. It's the exchanges individually working on ways to create products that can be fit for the purpose and can facilitate that demand. So that's definitely one of the issues and themes that we also tackling, tackling in terms of broader kind of mention it a little bit already, but what we've seen certainly this year is an increased demand and inbound demand from some of our US, partners and participants that want to expand into Europe, and they're trying to figure out the best way to do it. And it comes from a wide range of clients and participants, from the retail brokers all the way to the systematic fans. 

Sean McMahon  6:24  
Well, hey, listen. Iouri, I know it's a busy couple of days for you here, and obviously we're here on the sidelines of a vibrant conference, so I appreciate you taking your time to join me today. 

Iouri Saroukhanov  6:32  
Perfect. Thank you very much for having me. 

Sean McMahon  6:35  
All right. Well, that's it for right now. Be sure to watch this podcast feed throughout this week. We'll be bringing you more episodes from the International Derivatives Expo hosted by the Futures Industry Association.