Cboe Re-Enters Digital Assets Market With ErisX Buy

Cboe Global Markets has entered into a definitive agreement to acquire Eris Digital Holdings (ErisX), a US based digital asset spot market, a regulated futures exchange and a regulated clearing house. The acquired business will be rebranded to Cboe Digital.

Cboe says ownership of ErisX presents “a unique opportunity” for it 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. Cboe launched futures on bitcoin in late 2017 but abandoned the project in 2019 amidst falling volumes on the exchange as traders gyrated towards rival CME’s offering.

ErisX was built in 2018 to mitigate common industry pain points and grow the digital asset market to a global scale. Cboe says that despite seven in 10 institutional investors expecting to have digital assets as part of their portfolios in the future, a lack of globally consistent regulation and a dearth of sufficiently robust exchange and clearing infrastructure remain major barriers to entry. “As a global market infrastructure provider, Cboe is uniquely positioned to offer a digital asset marketplace focused on regulatory compliance and transparency to help institutions embrace the digital asset class and offer digital asset trading to their clients,” it states.

Cboe says it also has secured the support of a broad range of market participants, including retail brokers, crypto 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.

As members of the Digital Advisory Committee, DRW, Fidelity Digital Assets, Galaxy Digital, Interactive Brokers, NYDIG, Paxos, Robinhood, Virtu Financial and Webull say they are committed to ongoing engagement with Cboe Digital markets. 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 says it will leverage the engagement and collaboration with these market participants to continue to operate ErisX as a resilient, trusted and transparent digital asset venue.

“We believe our acquisition of ErisX, coupled with broad industry participation and support, will help us bring the regulatory framework, transparency, infrastructure and data solutions of traditional markets to the digital asset space,” says Ed Tilly, chairman, president and CEO of Cboe Global Markets. “ErisX has shown an unwavering commitment to improving spot and derivatives crypto trading, and I am confident that together we can not only meet the growing demand for institutional and retail trading solutions but also push the boundaries of digital asset innovation and unlock its next phase of growth.”

Thomas Chippas, CEO of ErisX, adds, “Derivatives are an essential component of a scaled digital marketplace, and Cboe, as one of the world’s largest derivatives exchange operators, has the global customer network, international operations and innovative vision to not only grow ErisX, but the entire digital asset space. With Cboe’s support and network of industry partners, ErisX will enable new and established firms to compliantly and confidently offer cryptocurrency spot and derivative products to their clients, making our transparent and trusted digital asset market the destination of choice for any market participant offering crypto spot or derivative trading services now and in the future.”

Cboe says it plans to use its real-time, risk and derived data expertise and global network to provide a transparent view into digital asset markets and trade execution. Leveraging digital asset data from ErisX and Cboe’s existing index calculation capabilities, Cboe Digital intends to develop and distribute digital asset indices for potential use in ETP creation and other derivative product opportunities.

Cboe also plans to leverage the Digital Advisory Committee to provide input and guidance on the development of a robust market data offering based fundamentally on actionable bid and offer prices from the ErisX spot crypto market. This market data offering is expected to be modelled after established best execution practices in other asset classes, ultimately intending to develop a benchmark to help Cboe Digital’s industry partners and other market participants evaluate the appropriateness of crypto execution prices.

“We founded ErisX with the vision of creating a transparent, well-regulated market for cryptocurrencies and cryptocurrency derivatives in order to facilitate adoption by traditional financial institutions,” says Don Wilson, founder and CEO of DRW. “Cboe’s acquisition of ErisX and creation of Cboe Digital with a group of institutional partners will accelerate this vision.”

Tom Jessop, president of Fidelity Digital Assets adds, “The Cboe-ErisX combination represents an attractive opportunity to collaborate with a global exchange operator who can bring increased regulatory proficiency, resilient technology and product expertise to digital asset markets.”

Meanwhile, Damien Vanderwilt, co-president and head of global markets of Galaxy Digital, says, “As with traditional financial market dynamics, the digital assets ecosystem critically needs scalable, well-governed, and unconflicted venues to promote reliable price discovery and capital exchange.”

ErisX’s futures exchange and clearing house are regulated by the CFTC, and its clearing house is registered with FinCEN and licensed in many US states and territories.

The transaction, which Cboe says it plans to fund with a combination of cash on hand and increased debt, is expected to close in the first half of 2022, subject to regulatory approvals and other customary closing conditions. Terms of the deal were not disclosed, however the company noted that the purchase price is not material from a financial perspective.