Cboe, CME Group, and Intercontinental Exchange Shares Drop Amid Competition Concerns

Shares of Cboe Global Markets, CME Groupand IntercontinentalExchangeslipped on Tuesday amid concerns that new perpetual futures offerings from Coinbaseand Kalshi could intensify competition in derivatives trading. TD Cowen told investors that the approval likely creates more competition in the retail market, and is likely to curtail multiples on selected exchanges, most notably Cboe Global.Meanwhile, RBC Capital acknowledged concerns that the Commodity Futures Trading Commission's May 29 approval of bitcoin perpetual futures could extend to other asset classes, but said it views the competitive risk as manageable.STOCK VOLATILITY:The Commodity Futures Trading Commission last week approved Kalshi to offer bitcoin perpetual futures in the U.S. on regulated markets, which TD Cowen believes is causing volatility in exchange stocks. The firm told investors that the approval likely creates more competition in the retail market, and is likely to curtail multiples on selected exchanges, most notably Cboe. TD Cowen sees Cboe most at risk, followed by CME Group and IntercontinentalExchange, while seeing little risk to Nasdaqand Marex Group.MANAGEABLE RISK:Also noting that shares of Cboe and CME have declined, likely due to concerns that the CFTC's approval of bitcoin perpetual futures on May 29 could extend to other asset classes, RBC Capital told investors that it believes competitive risk is manageable given fundamental product differences and structural advantages for both exchanges.Perpetual futures have attracted significant retail interest but limited institutional demand, favoring CME's institutional-focused business model, the firm argued. CME's existing S&P Dow Jones license will cover perpetual futures under the new CFTC framework, potentially restricting competitors from launching SPX perpetual futures and limiting competitive risks for Cboe's SPX options franchise as well. Additionally, RBC pointed out that U.S. clearing houses are likely to impose leverage restrictions on perpetual futures for prudent risk management. Cboe's SPX zero days to expiration, or 0DTE, options face minimal risk given material structural differences. While 0DTE options limit downside to premium paid, perpetual futures expose investors to forced liquidation risk -- fundamentally different risk profiles that appeal to distinct investor segments, it added.PRICE ACTION:In Tuesday afternoon trading, shares of Cboe, CME Group and IntercontinentalExchange have dropped 9%, 4% and 3%, respectively.