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00:00Welcome.
00:01Benzinga Nation.
00:02Today, we've got another great conversation with Rob Morocco, who is the vice president
00:08and global head of ETF listings.
00:10Rob, welcome to the show.
00:11Thanks for having me.
00:12Absolutely.
00:13You know, there's so many great things to talk about here, but for the folks that might
00:16not be familiar, give us a quick, brief overview of SIBO Global Markets and its listings business
00:22as well.
00:23Absolutely.
00:24So, most folks know SIBO as the innovator for derivative products and really the listed
00:31options market dating back to 1973.
00:34Today, the organization really is at its core one of the largest global exchange operators.
00:40We operate 26 markets around the globe.
00:43Very specifically with listings and what does that translate to, as you mentioned, I look
00:47after our ETF business.
00:49We have a network of five different exchanges globally that we're working with global asset
00:53managers and local issuers of ETFs and listing their products on our markets, on our equity
00:59exchanges, on our stock exchanges, essentially.
01:01Today, we're listing ETFs in the US, Canada, the UK and Europe, as well as Australia.
01:09So, we just ticked over 1,000 ETFs this year, very specifically in the US.
01:16We are actually the second largest exchange by number of primary ETF listings, so the
01:21listings that are on our exchange.
01:23We've done that really all over the last nine years and becoming really focused on
01:29being best in class in working together to service ETFs and make sure that the trading
01:33of those ETFs on our exchanges is robust and liquid.
01:37So there's obviously so many different things that you're doing in the ETF space, especially
01:41when it comes to option strategies.
01:43I want to talk about the defined outcome ETFs.
01:45Tell me a little bit more about the rise of that and the popularity it's gaining.
01:49This has been a real key focus, not only for us, but much of the industry because typically
01:56these types of strategies were not available.
02:00They were not available in an ETF wrapper, but they were typically over-the-counter products,
02:05not necessarily always readily accessible, and quite frankly, only available to certain
02:12types of investors that had minimums and a little bit more exclusivity, if you will.
02:17What the ETF has done for these target outcome, defined outcome, buffer ETFs, has really,
02:23the ETF wrapper has democratized and allowed for just greater access.
02:27Very specifically, what in a nutshell these products are, is a very simple options trade
02:34underneath that's either using a broad-based index or on top of an existing ETF, like SPY
02:41for instance.
02:43They're implementing a options trade that you were giving up a little bit on the potential
02:49upside, but you're having a buffered or a defined outcome as it relates to protection
02:55on the first 5, 10, 15, 30% of the downside.
03:01Very similar to what would typically look like a structured product, but now wrapped
03:06up in an ETF.
03:07Very simple.
03:08Typically, it's using, the ETF is implementing flex options inside of the portfolio in order
03:14to allow for that outcome during that period.
03:19And so it's a very clean way of putting on a pretty sophisticated strategy at a very
03:26affordable price.
03:27So that's ultimately why these, in my personal opinion, these products have been so successful
03:33over the last three to five years as we've seen them come.
03:38When these products originally came, it was from a few core issuers.
03:44Now we clearly see other asset managers adding these types of products to their shelves.
03:49It's a clear indication that these products not only, I believe, are here to stay, but
03:54the continued growth in the trading volume and in the assets that are going into these
03:59products.
04:00Yeah.
04:01I remember when I started learning options, then there was, all right, how do I take it
04:02to the next level?
04:03And you get involved with ETFs and you've got iron condors and butterflies.
04:07And I'm like, how in the world?
04:08Like what?
04:09So there's a lot of great ways to adjust to your strategies that the individual may have
04:14at home.
04:15You mentioned the issuers and I want to see how SIBO kind of, give me a sneak peek behind
04:17the scenes of how SIBO works with issuers to kind of develop these options-based ETFs.
04:23Absolutely.
04:24So first and foremost, we have the derivative experts in-house given just, again, our legacy,
04:30our core competency.
04:32So we have a significant depth of bench.
04:36So as issuers are going to the drawing board, working through the product development, how
04:39is SIBO able to aid in some of that product development work with some thoughts?
04:46Are there opportunities to enhance the underlying contracts that are going to be used?
04:51So for instance, in case in point with the defined outcome ETFs, we created new order
04:56types for the option so that the portfolio manager is able to better manage the ETF,
05:02have more flexibility when managing the ETF.
05:05So we're working with them on a product development perspective.
05:08In many cases also, we are able to create indices, create an index for the ETF to track.
05:13And so our index group and our data group work very closely as part of that product
05:17development, product consultation.
05:20On the actual strategy, great, it's baked.
05:24We now need to list.
05:25Well, how are we going to list it?
05:26Do we have the ability to list it under our rules or do we need to go seek permission
05:32from the regulator in the US, the SEC, other regulatory bodies around the globe?
05:37So it's making sure that we have the regulatory piece and the framework ironed out.
05:42And then ultimately, what is that once it lists?
05:45How do we work together with our issuer and the market maker and market participants of
05:49our change to make sure, number one, fair and orderly market, but two, that there is
05:54deep liquidity so that as advisors, as retail folks want to access the product, they're
06:00going to have a good experience when entering or exiting a position in the ETF.
06:03Yeah, the liquidity aspect of it is huge, especially so that the trader, the individual
06:08can get in and out of positions without kind of sacrificing on the spread, if you will.
06:12You know, as a retail trader myself, I've seen the change in the landscape in the past
06:16three years, especially since COVID and the rise after.
06:20But I want to get insights from you, from SIBO.
06:23How has the trading landscape kind of changed in the past three years?
06:26Look, we all went through the last three, almost four years now since COVID and everyone
06:33saw the uptick in retail trading.
06:36And retail is still very well and alive from a trading perspective.
06:42The best example I could point to has been this year, earlier in January, in the U.S.
06:47we received regulatory approval and the ability to list spot Bitcoin ETFs.
06:52And so we listed these products.
06:54We listed six out of the 11 that came to market.
06:57And the trading volume has just been absolutely tremendous, absolutely tremendous.
07:02Over the list, as we're approaching almost that six month point, these have been some
07:06of the most liquid ETFs, not only in the marketplace, but in terms of a new launch, just very, very
07:13atypical.
07:14And when we look at that trading volume and we look at what size of those trades, small
07:19trades, one, two, three, a lot of odd lot trading, right?
07:23And clearly indication, it is a lot of retail activity accessing those ETFs.
07:29And I think, again, it's a testament to that retail could go directly and buy, and many
07:34do, digital assets, digital coins.
07:39But the ability, once a product is wrapped in an ETF and the accessibility and the ease,
07:44and now it's in my brokerage account with the rest of my stock portfolio, stock and
07:50ETF portfolio, it just, it's a, again, it's a testament to the access that the wrapper
07:55affords.
07:56Now, you know, if you ever see a small lot being traded, it's probably me.
07:59But speaking of which, you've got retail, right, that we've been kind of having a point
08:03focus on this conversation.
08:05What impacts have they had on the industry, whether it's, hey, we've had to kind of pivot
08:09a certain thing.
08:10So make sure that we provided quality offerings to the retail side.
08:15How have they impacted the industry?
08:17I think the impacts is really the democratization, to be honest.
08:21And Defined Outcome is a perfect example of that, where, again, that type of strategy,
08:29if you were able to access it, again, retail investors typically wouldn't have the ability
08:35to find a product like that, that they could easily be able to put an exposure on at a
08:44competitive price point in a transparent and fair market.
08:49That wrapper just, it's, the impact has been just greater access, greater access, greater
08:54choice to really some spectacular products that are out there.
08:59And so that I think the impact has been really not so much on what is the industry needed
09:04to do to accommodate.
09:06Clearly there is a capacity, clearly our market structure, especially in the US, extremely
09:12robust.
09:14I think it's more around the impact to being for retail to access strategies that necessarily
09:20were different, were harder for them to get to and at the same price point.
09:26All right.
09:27Well, hey, I appreciate your time here today.
09:29It's always fun to talk with Sibo about ETFs, options, always a great time.
09:33Thanks so much for the conversation.
09:35You got it.
09:36That is Rob Morocco, who is the Vice President and Global Head of ETF Listings.