For… well… ever, when new exchanges enter the market or try to enter an incumbent’s market, the chances of success have been fleeting at best. My first thought when a new exchange announced was they were doomed. While I am not saying this has changed definitively, I do think that there are a spat of upstarts that have nurtured themselves along for several years and combined with changes in trading technology, new instruments, and the regulatory landscape in the U.S., the chance of viability has improved.

I attended the FIA Quarterly ETD review this last week and it, along with an announcement in John Lothian’s newsletter, confirmed some of my thinking. In Will Acworth’s review of Q3 2024 Volume, he noted that for single stock options and ETF Options, of the six companies operating exchanges in the space, not one company has more than 1/3 of 2024 volume. While the growth of traditional trading on options has continued to grow steadily, there has been new participation by retail traders that is frothy and actively encouraged by the exchanges. The CBOE attending a Robinhood type retail broker conference a decade ago would have seemed unlikely to me. Last, the John Lothian Newsletter announced this week that IEX will be entering the option exchange market and sponsoring his options focused newsletter.

What’s different to me now compared to say when Eurex U.S. made its run or any one of Howard Lutnick’s failed runs(so far) is that these exchanges are less about buying volume or relying on big partners to drive volume. Instead they are relying on new instruments or variations that are developing, growth in retail, fractionalization, event based trading, tokenized assets and other twists. The fact that no one really owns these particular options markets as of yet and it continues to grow over multiple exchanges signals a change to me.

Another factor in play is that technology is making more innovation in tradable markets possible. I want to get into it more later but a year ago, the DTCC seemed to be under the impression that tokenizing assets would be in low volume/volatility markets initially until the technology proved itself. Any incumbent change resistance aside, the DTCC has actually been relatively proactive at running experiments with technology providers and, a year on, the potential for tokenization of core markets sooner than later seems likely.

What looks to be relatively permissive regulation going forward combined with some more accountable financial community stakeholders ensuring governance and risk are accounted for, tells me there will more opportunities for digital assets and unique new instruments to trade. That opens the playing field to exchanges in ways that we haven’t seen before. Ultimately it now seems to me that leading the change effectively as a business will be the long pole in the tent for exchange success over the next several years.