Cboe Global Markets Enters Digital Asset Market With Acquisition of ErisX

May 2, 2022 - First announced in October 2021, Cboe Global Markets has confirmed that it has completed the acquisition of Eris Digital Holdings, LLC - ErisX, an operator of a U.S. based digital asset spot market, a regulated futures exchange and a regulated clearinghouse. Ownership of ErisX allows Cboe to enter the digital asset spot and derivatives marketplaces through a digital-first platform developed with industry partners to focus on robust regulatory compliance, data and transparency.

In October last year, it was announced that Cboe plans to operate its digital asset business as Cboe Digital. The company also secured the support of a broad range of market participants, including well-established retail brokers, crypto-leading firms and sell-side banks, who are expected to form a Digital Advisory Committee tasked with advising Cboe on the ongoing development of the Eris spot and derivatives markets.

Members of the Digital Advisory Committee were announced in October as being: DRW Fidelity Digital Assets Galaxy Digital Interactive Brokers NYDIG Paxos Robinhood Virtu Financial Webull

The Cboe also revealed in its announcement in October 2021 that "certain members of the Digital Advisory Committee listed above also intend to acquire minority ownership interests in Cboe Digital and to serve as partners in the growth of the business. Cboe Digital will leverage the engagement and collaboration with these market participants to continue to operate ErisX as a resilient, trusted and transparent digital asset venue."

"Adding ErisX to the Cboe network is another exciting chapter in Cboe's growth story. We see enormous potential in the digital asset market and are excited to apply our blueprint of success to this burgeoning asset class," said Ed Tilly, Chairman, President and Chief Executive Officer of Cboe Global Markets. "Tom Chippas and the entire ErisX team have made significant progress bringing the regulatory framework and transparency of traditional markets to the digital asset space, and I look forward to working together, with our industry partners, to grow the digital asset market on a global scale."

Cboe plans to operate the ErisX business as a subsidiary with Thomas Chippas, Chief Executive Officer of ErisX, remaining as head of the digital asset business, reporting to Chris Isaacson, Executive Vice President and Chief Operating Officer of Cboe. In addition to operating the existing spot, derivative and clearing platforms, Cboe also intends to develop and distribute a range of digital asset data products (subject to regulatory approval). Using robust market data based fundamentally on actionable bid and offer prices from the spot crypto market, Cboe Digital plans to develop a benchmark data stream to help market participants evaluate the appropriateness of crypto execution prices.

"I am incredibly proud of the ErisX team for their relentless pursuit of innovation in the digital asset space. From the beginning, our vision was to advance the digital asset spot, data, derivatives and clearing ecosystem by making regulatory compliance and operational integrity the foundation of the ErisX business," said Thomas Chippas, Chief Executive Officer of ErisX. "I couldn't be more excited for the future as we join forces with Cboe and our industry partners to leverage their collective market expertise and global resources to not only grow ErisX, but also to develop global regulatory and compliance standards that have a lasting impact on the entire digital asset space."

The official press release today from Cboe states, "With Cboe, ErisX aims to be a digital asset market rooted in the exchange principles of transparency and regulatory compliance, supported by a network of intermediaries, providing client-driven solutions that help institutions fully embrace this emerging asset class. Digital assets are globally recognized and are expected to continue to benefit from a regulated derivatives market and central clearing to help mitigate counterparty risk—providing more efficient price formation, additional hedging tools, enhanced transparency, and deeper liquidity. Cboe believes meeting the demand for trading digital assets with the advantages of exchange trading is beneficial for all investors, and intermediaries have a key role to play in the ongoing development of Cboe Digital spot and derivatives markets."

Chris Isaacson, Executive Vice President and Chief Operating Officer of Cboe Global Markets commented, "Increased retail participation has fuelled record trading across equities, derivatives and digital assets, demonstrating how investors of all types want access to sustainable financial solutions. Cboe is uniquely positioned to help the growing segment of retail investors access traditional and new financial markets through product innovation, education and collaboration with our industry partners and intermediaries—and now we can leverage the regulatory framework, transparency, infrastructure and data solutions of those trusted markets to further mature and expand digital asset trading and clearing for a broader user base."

According to the Cboe, market participants, including a growing number of institutional firms, have continued to request exposure to digital assets. The ErisX platform was built with the traditional exchange principles of transparency, price discovery and regulatory controls, laying the foundation for institutional trading of digital assets. ErisX's intermediary-friendly model has brought resiliency and security to the digital asset space with physically delivered futures contracts traded at and cleared through a CFTC regulated Designated Contract Market (DCM) and Derivatives Clearing Organization (DCO). ErisX futures contracts trade alongside its spot market on an innovative and unified platform, bringing price transparency and collateral efficiency.

Terms of the deal were not disclosed, however the company noted that the purchase price is not material from a financial perspective. ErisX is positioned to be a long-term leader as regulation is expected to play an increasingly prominent role in digital assets, and Cboe plans to make the early investments necessary to help maximize revenue growth potential over the medium and long term. Cboe anticipates ErisX will reach EBITDA profitability within two to three years, benefiting from a diversified stream of revenue drivers.

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