Cboe and Robinhood target October launch for KPI binary options

Cboe Global Markets plans to introduce binary options linked to company-specific key performance indicators as early as October, subject to regulatory approval. Robinhood is set to be the first retail broker to make the products available at launch, with both companies planning to waive fees through the end of 2026.

In its Sept. 30 announcement, Cboe said it initially intends to list the contracts for 23 U.S.-listed companies among the most actively traded American stocks. The products would trade on Cboe’s registered U.S. securities exchange and would be regulated by the Securities and Exchange Commission.

The proposed contracts would let investors take a position on whether a defined financial or operating metric reaches a preset level. Cboe said it sees demand for event-driven products tied directly to companies investors follow.

Cboe Exchange had already filed its proposed rule change with the SEC on June 30. The SEC’s July notice describes the proposed Binary KPI Options as European-style, cash-settled contracts whose value depends on whether a metric disclosed in an issuer’s earnings-related SEC filing meets or exceeds a stated strike level.

A KPI would be a financial or operating metric reported in a Form 8-K, 10-Q or 10-K. A call option would pay when the KPI is at or above its exercise price at expiration; a put would pay if the KPI comes in below that level. The applicable metric and reporting period would be specified when the option is listed.

The options would expire on the date an issuer announces results for the relevant reporting period. Contracts tied to companies reporting before regular market hours would be A.M.-settled, while those linked to after-hours reporters would be P.M.-settled.

Binary options have an all-or-nothing structure: the payment turns on whether the contract is in or at the money, rather than by how far the metric exceeds or misses the threshold. The proposed payouts are bounded between $0 and $1. If a KPI is unavailable on the expiration date, the clearing rules could instead produce an alternative settlement amount below the standard $1 payment. A later restatement of a KPI would not alter a contract that had already expired and settled.

Cboe Clear U.S., the group’s clearinghouse, sought temporary registration as a clearing agency under Section 17A of the Securities Exchange Act on June 30. Its application seeks authority to act as central counterparty for fully margined, cash-settled binary security options, including the KPI contracts. The clearinghouse is already registered with the Commodity Futures Trading Commission as a derivatives clearing organization and clears cash-settled index futures on digital-asset indices.

Cboe said the securities-market structure distinguishes its proposed KPI products from similar event-based contracts traded on designated contract markets and is intended to place them within the oversight and investor-protection framework of U.S. securities markets. Robinhood’s chief brokerage officer, Steve Quirk, described the contracts as a more precise retail tool for trading anticipated company KPIs.

The planned October launch remains contingent on regulatory approval.