The rise of the retail investor has emerged as one of the most significant trends in financial markets over recent years. At Cboe, we have observed the growing influence of retail investors firsthand, especially within the US options market. However, Europe continues to lag behind other regions in terms of retail participation in its capital markets. This discrepancy can be attributed to various factors, including regulatory and taxation differences, cultural attitudes towards investing, and the availability of educational resources. However, as European policymakers and market participants recognise the benefits of an engaged retail investor base, efforts to encourage retail activity in European markets are gaining momentum.

It was against this backdrop that Cboe Europe Derivatives and The Options Institute, Cboe’s education arm, conducted a survey to gain insights into current retail investing preferences in Europe, attitudes towards options products, and interest levels in educational resources. The aim was to help to inform The Options Institute’s delivery of services in Europe and empower a new generation of investors. Read the press release here.

Over 5,000 retail traders across France, Germany, the Netherlands, Spain and the United Kingdom were surveyed with respondents categorised into three broad groups: current derivatives users; participants interested in derivatives but who do not currently trade them (derivatives prospects); and those who were not interested in trading derivatives.

Among derivatives users, 62% were interested in trading options contracts with stocks/shares as the underlying, and 61% expressed a willingness to take an advanced course to learn more about options. Among derivatives prospects, 54% of those aware of options were interested in trading them with stocks/shares as the underlying, though 66% indicated they would need more basic financial education before considering options. Both groups cited exchanges as one of the most reliable and trusted sources of education. The full survey results are available here.

The survey validated our long-held belief that exchange-traded equity options can play a significant role in attracting potential investors to European markets, if the pent-up demand can be effectively unlocked. The key, we believe, lies in four main areas: accessibility, education, technology, and regulatory support.

At CEDX, we have been working hard on accessibility and lowering the traditional barriers to entry to institutional and retail investor by creating a more efficient, simpler, and cost-effective pan-European derivatives exchange. In terms of education, more needs to be done to cultivate an investing culture among European retail investors and provide them with the necessary resources to learn about the utility of options and start investing. Therefore, we are excited that The Options Institute will offer educational courses to European retail investors starting early next year, addressing the limited access these investors have had to direct options education compared to other regions.

The Options Institute brings decades of experience in educating investors, offering an array of courses and resources. The insights from the survey and subsequent focus group discussions will shape its planned activities in the European market, helping retail investors better understand options and the utility they can provide to their portfolios.

Technology will also be a powerful tool in encouraging retail activity, ranging from mobile-first trading platforms that can significantly lower barriers to entry, to micro-investing apps and AI-advisors that attract a new generation of investors seeking simplicity and automation. We’re already seeing that many neo-brokers that have fostered retail participation in the US, such as Robinhood and Tastytrade, are making their way to Europe. 

Lastly, a supportive regulatory environment is essential for fostering retail activity: Despite the utility of exchange-traded derivatives and the broader benefits they bring, their remains a perception that they are too risky. Exchange-traded derivatives are transparent, centrally cleared financial products that offer tremendous utility for investors, including risk management and income generation opportunities that allow investors to optimize their portfolios, navigate market volatility, and express market views with greater flexibility and efficiency. Specifically, because the price of an option is a small fraction of the cost of the underlying asset, options can serve as a cost-effective, low-stakes introduction for beginners to gain hands-on experience in financial markets.

We therefore encourage policymakers to champion access and opportunity for retail investors, with measures such as European Commission’s Retail Investment Strategy presenting an opportunity to empower retail investors by ensuring they have access to exchange-traded derivatives. Placing access and opportunity at the forefront of this framework will allow investors to make informed decisions based on their needs and preferences.

Encouraging retail activity in European markets clearly requires a multifaceted approach. By addressing the barriers that deter retail participation and providing the necessary tools and resources, we can unlock the potential of a more engaged and informed retail investor base, particularly in exchange-traded derivatives. This not only benefits individual investors but also contributes to the overall health and resilience of financial markets. As Europe continues to evolve its capital markets, fostering retail participation will be a key component of its growth and development strategy.