Cboe Buys Hanweck and FT Options in Dual Acquisition

Cboe (Chicago Board Options Exchange) Global Markets has announced two acquisitions: Hanweck, a New York-based provider of real-time risk analytics; and FT Options, a portfolio management platform combining research with risk and volatility analytics. Cboe is hoping that these buys position the exchange group as a leader in risk analysis, with a focus on portfolio and balance-sheet risk.

Cboe has seen high demand from clients for tools helping them to gain better visibility into the risk profiles of their positions, and to help them anticipate, adjust for and hedge risk. Clients were asking for more transparency into the many complex margin models that exist and for the ability to determine margin exposures in real time. 

That’s why Cboe zeroed in on FT Options, which has a 17-year history of serving prop shops and hedge funds, says Catherine Clay, SVP and head of information solutions at Cboe.

“We went out into the marketplace, and we saw what was available in terms of solving these problems for our clients,” Clay says. “These two companies were head and shoulders above the others that we saw. So bringing them in simultaneously was really our attempt to, in one action, get to the heart of what our clients were saying they needed in terms of risk analytics.”

In 2010, the International Securities Exchange (ISE) purchased a minority stake in Hanweck, which was then an early adopter among financial companies of GPU technology for complex computing problems. After Nasdaq acquired ISE, Nasdaq became a minority equity shareholder in Hanweck; Cboe bought out those shareholders for this acquisition.

Hanweck released its most recent analytic, the Borrow Intensity Indicator, in 2018. Through machine learning and predictive analytics, this indicator provides transparency for securities lending rates by the millisecond. ISE had also previously invested in securities lending platform Quadriserv, and led a $34 million preferred stock investment round to support it.

Though Clay could not comment on whether Cboe is planning to release any options contracts related to securities lending or short selling, she said it’s a conversation to be had internally in a few months.

Two years ago, CBO began building e-commerce-style distribution channels for the exchange’s data and analytics, forming its Information Solutions Group. The group’s formation was the groundwork needed to integrate the two new acquisitions, and will be a natural home for FT Options and Hanweck’s API-enabled platforms. 

“The hard thing [integrating these two companies] is actually the fun thing: to think about how we are going to take these great technologies and bring them into Cboe,” Clay says. “And how do we make the technology stack that supports these businesses really efficient and optimized so that we’re gaining efficiencies on the back-end, and not duplicating efforts or computing?”

Reflecting back on the acquisition of Bats in 2017, which required a huge technology integration effort, Clay says she is confident Cboe can do it again.