More than two years since the effort was first proposed, Cboe is ready to flip the switch and finalize the migration of C1, its largest options market, to more advanced trading technology on Oct. 7. Cboe officials say this migration will bring dramatic improvements in the performance of C1, which will continue to support both open outcry trading on the Cboe floor and fully electronic trading.
But rather than rest on its laurels, Cboe's tech team is lining up another major modernization effort: the development of a new data analytics platform. The plan is to extract more data from the new trading platform to spark the development of new products and deliver new trading ideas for its customers.
Production tests of the new C1 platform have been completed and member test opportunities are drawing to a close in advance of the October go-live date. The pending changeover to the new technology, which Cboe acquired through its merger with BATS in 2017, has already been completed for two other exchanges within the Cboe group: the C2 exchange, Cboe's all-electronic options market, and the Cboe Futures Exchange, the home of its VIX futures. This is the last phase of the migration, and once completed all of Cboe's markets will be running on the same technology platform.
The goal is to provide "a superior, unified trading experience across all our equities, options and futures markets," Cboe President and CEO Edward Tilly said in a conference call with investors in August. "The completion of the migration is expected to also provide our customers with a more efficient and user-friendly trading experience that includes greater bandwidth, significant latency reduction, enhanced risk controls and improved complex order handling," he said.
Tilly added that completing the C1 migration will free up Cboe's technology team to redouble its efforts on new growth initiatives, and the new data platform in particular. "We intend for the new platform to combine data derived from existing Cboe assets with new functionality created in-house to glean actionable trading insights for our customers across all of our business lines," he said. Though the project is already underway, the effort will accelerate after the C1 migration is completed because the group's technology staffers will have more time to "move from concept to design-and-build phase."
Chris Isaacson, Cboe's chief operating officer, provided some additional insights into Cboe's data strategy on the August call. He noted that the company already has invested in developing "derived data" offerings such as LiveVol, an options analytics service, as well as better delivery of market data. The goal for the new data platform is to make the market data surrounding its products more available to two sets of potential users. Internally, the platform will help Cboe's business units make "better data-driven decisions," he said. And externally, the new data platform will allow customers to feed more data into their trading models and refine their trading strategies.
Cboe's focus on developing the data side of its business matches similar trends at other market operators such as Intercontinental Exchange and CME Group, commented Rich Repetto, exchange analyst at Sandler O'Neill, the investment bank. What distinguishes these companies from other data providers is that they can source unique data from the products that trade on their exchanges and then package it up for customers looking to enhance their trading and risk management strategies. "They are not just aggregating data from other people," Repetto said. "They have proprietary products that provide unique information flows for their market data and analytics services."
Will Acworth contributed to this report.