The Chicago Board Options Exchange, the largest options exchange in the US, will on Monday strengthen its presence in Asia by signing an agreement with the Korea Exchange that sets a foundation for the joint development of listed options contracts.
The agreement comes as the CBOE is expected to move towards an initial public offering following a $1bn deal last week to settle a long-running legal dispute with members of the Chicago Board of Trade, which had delayed its move to demutualise. The CBOE is one of the world’s last big member-owned exchanges.
In the fast-consolidating global exchange sector, the CBOE is likely to be an enticing takeover target for a larger exchange, such as NYSE Euronext or Nasdaq OMX. International tie-ups such as the Korea Exchange deal make it an even more attractive proposition.
The Korea Exchange, created in 2005 from the merger of the country’s three stock and futures markets, is the world’s second-largest derivatives exchange after the Chicago-based CME Group. Its listed options and futures on the Kospi 200 index are the world’s most actively traded derivatives contracts.
Last year the CME Group signed a deal with the Korea Exchange to list the Kospi 200 futures contract on its electronic trading platform. While the listing was originally proposed to be rolled out this year, it may be delayed following a change in top management at the Korea Exchange in March.
Bill Brodsky, CBOE chairman and chief executive, suggested that, with the legal wrangle with the CBOT behind it, the CBOE – the world’s fifth-largest derivatives exchange by volume – could now focus on positioning itself in the global derivatives industry.
“The financial marketplace is increasingly becoming more global,” Mr Brodsky said. “Opportunities such as this to create cross-continent relationships are essential to growing our business.”
Jung-hwan Lee, the Korea Exchange chairman and chief executive, praised the CBOE’s “considerable expertise and experiences in operating the derivatives markets”.
Richard DuFour, CBOE executive vice-president, said the agreement could result in the development of new products within a year. He said: “We could trade something based on the Korean economy, they might trade something based on the US economy – there’s all kind of ways you can work together.”
About 15-20 per cent of CBOE’s order flow comes from outside the US, mostly from Europe, with much smaller volumes from Hong Kong, Singapore and Australia.