French Insider Podcast Ep. 32
Navigating Global Capital Markets with Erik Sloane of Cboe Global Markets
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Listen to the podcast released February 1, 2024 here: https://www.sheppard.com/multimedia-547
On this episode of French Insider, Erik Sloan, Chief Revenue Officer of Cboe Canada and the Global Head of Company Listings for Cboe Global Markets, joins host Andrew Bond to explore how Cboe operates a global network of securities and derivatives exchanges that help companies efficiently navigate global capital markets, including the factors that set the Cboe exchanges apart from other exchanges and the types of companies well-suited to list their securities on one or more of the exchanges in the Cboe network.
About Erik Sloane
Erik Sloane has been with Cboe Canada since its inception and helped define and implement its foundational stock exchange and fund distribution platforms. He’s since held several senior roles, including Head of Funds & Trading and Head of Product Management. As Chief Revenue Officer, he is currently responsible for driving growth by working closely with capital-raising companies, asset managers, sell-side firms, buy-side firms and other industry stakeholders.
Erik launched his career at a global business and technology consultancy firm. Prior to joining Cboe Canada, he led project management at the Alpha Exchange, where he previously oversaw delivery of its core technology platform. He’s also chaired several industry advisory groups instrumental in shaping Cboe Canada's strategy and currently serves on the Operations Committee of the Canadian ETF Association (CETFA).
About Andrew Bond
A partner in the Corporate Practice Group in Sheppard Mullin’s Century City office, Andrew Bond has a broad-based securities practice. In addition to assisting clients with cross-border mergers and acquisitions and capital market transactions, he counsels Canadian clients on listing requirements for the NYSE, NASDAQ, and platforms operated by the OTC Markets Group. Andrew previously practiced in Canada, where he advised both U.S. and Canadian issuers on registered securities offerings, private placements, and Securities Exchange Act compliance.
Transcript:
Ines Briand:
Hello, and welcome to this month’s episode of Sheppard Mullin’s French Insider podcast, where we discuss how French and European investors can grow and expand their business in the US. Today’s feature is a replay of our February 1, 2024 episode, “Navigating Global Capital Markets” with guest Erik Sloane of CBOE Global Markets, where we explored how the CBOE operates a global network of securities and derivative exchanges that help companies efficiently navigate the global capital market, including the factors that set the CBOE exchanges apart from other exchanges and the type of company well suited to list their securities on one or more of the exchanges on the CBOE network. And now, off to the episode.
Andrew Bond:
Welcome to the podcast. I'm Andrew Bond, a partner at Sheppard Mullin's Century City office. My practice is primarily focused on capital markets, US securities, and in particular on helping non-US companies guide the regulatory minefield that we have here in the US. Today I'm very happy to be speaking with Erik Sloane, who's the chief revenue officer at the CBOE Canada and the global head of corporate listings for the CBOE. Erik, welcome to the podcast. I know you've got a lot of exciting things that the CBOE is doing and we're really looking forward to getting into that, but I think to start maybe you can just give us a little bit of your background and what led you to the CBOE.
Erik Sloane:
Thank you for having me on, Andrew, and pleased to be here. Indeed, I am the chief revenue officer for Canada and our global head of company listings for CBOE. Prior to this role, I filled a number of different roles, always within the exchange ecosystem, across technology, operations, quality assurance and product management teams, but I'll say always oriented around and at stock exchanges, where I've spent the last 18 years of my career building markets and putting best practice in place to really develop the most efficient and service-oriented businesses, always in Canada originally, and now very much excited to take that platform into the rest of CBOE's markets around the world.
In terms of what led me to CBOE and in particular the global listings business, it's really an artifact of our Canadian business being acquired by CBOE last year, where we spent 10 years building a competing stock market in Canada against a very well-established incumbent. We built out our trading platform with best-in-class tech and a unique focus on doing what's right for investors and wealth managers, and we brought that data out to the world and then we went back to work really trying to attract our first listings.
That's what really scratched an itch for me on this world is interesting, there's a lot of stuff going on, and got to work with some of the world's largest asset managers, like Black Rock, Vanguard, Fidelity and Franklin Templeton and others, in transferring their ETFs, or exchange traded funds, to our business. And from there, the world was our oyster. We got to work talking to public companies in the working groups, and that's lawyers, Andrew, like you and the team at Sheppard Mullin. They're investment bankers, IR firms, family offices, and we really found this network of people that led us into some incredible CEOs and founders, some of the coolest companies to disrupt financial markets and really create some first really cool IPOs in Canada. It was this success that led CBOE to acquire our business and create the opportunity for me to lead our global company listings business. So now really focused on putting CBOE on the map in five new countries. Canada, the US, the United Kingdom, Netherlands, and Australia. We're going to market in Japan too, but that one's going to follow later.
Andrew Bond:
Great. One of things I know that really brought you to my attention, and CBOE to our attention, is really the international focus. One thing that really frustrates a lot of my public company is giving liquidity to their shareholders who oftentimes are their employees who have received option and so forth, and restricted stock and so forth, that are in foreign countries and not having that liquidity. Because I think as anybody that's in the capital markets knows, it's very hard to trade in stock exchanges outside of their jurisdiction, and your global focus obviously helps alleviate that. Wondering if you can kind of get into a little bit, and you touched on it just now in terms of what markets are you in, what markets are you considering expanding to, and then the big question is, what makes you different from the NYFC or NASDAQ?
Erik Sloane:
Absolutely. It's a fun one, and CBOE's got a very unique footprint. You hit on a few things there, Andrew, that are worth highlighting. CBOE Global Markets, we are in fact a global business. We don't try and pull the world all exclusively into one single market, whether that's the US or Canada, the UK, Netherlands or Australia where we're operating licenses tier one markets today. For us, we've learned a lot over the years, and you've got to make the process of investing in a global company efficient. Everybody's business today, you look at the founders, probably many of your clients and partners, Andrew, they're global businesses. They have global investors, global operations, global management teams and shareholders, and you have a huge challenge. It's about forcing, today, the rest of the world to come to the US, open up a bank account or ask their broker to go to the US to trade that stock for us, having markets around the world...
And we're uniquely positioned that way. In some cases, we're the only incumbent to the flag bearing incumbent exchange. For us, having a market in each of those regions means we can actually work on bringing company stock out to the rest of the world instead of forcing the world to come to us. And we hope and our ambitions certainly are here to make that as efficient as possible so that for an end investor or an employee of a company that holds stock in a group that's going public, they can buy the stock in the currency of their choice in their home market without really having to navigate to the US or to any other country where a company may seek a listing and raise capital for investors. That for me is probably the single largest differentiator we're going to have against our global peers for a very long time.
On where we're working to separate and make ourselves different and stand out amongst, frankly, a very credible and established group of global, albeit maybe single country, exchanges, for us service is king. That means some really basic stuff as far as picking up the phone, responding to emails, and giving access ultimately to the work here, trying to bring these companies out to public markets. Seemingly basic, but a very important piece in every region we're working with companies today. And the second thing, really focused on education. A lot of the groups we're working with, maybe first or second time CEOs in public companies, and I've been in this business for 18 years. I'm still learning about what goes on in capital markets and how investors find us and how companies know their CAP tables, and I think that's going to continue as a personal development item for me and learning about the right way and the best way to do things. And as the world changes, so too will that best practice, and I'm absolutely thrilled to be able to do that on behalf of CBOE, working with teams today around the globe.
Andrew Bond:
To kind of build on, a large part of our audience are French, and so if you're a brand public company or a company that's thinking about going public and you have global operations and a shareholder base that has a significant part of that shareholder base in the US, so what would you say to a board or an executive officer of a company like that, that's thinking about going public in both France the United States or, guess it should be Europe in general, United States, what would the CBOE global markets really bring to a company like that? What type of value would you be able to bring to a company like that?
Erik Sloane:
The first thing I would put out to them is, know your options. The beautiful thing in this world, there's a lot of information you can obviously glean from the internet, but more importantly, and I think, Andrew, for you and the Sheppard Mullin team, know where your partners are today and ask a bit about what their options would look like. There are markets in each country you mentioned that will look to compete to win that business and doing it a little bit onward, taking a meeting, having a phone call and it's 45 minutes or an hour of management team's time, to go and really discover the value proposition of each of the markets they're considering listing upon, the raising capital, that's an obvious pull, right? As soon as an investment banker says, "Hey, I've got money for you to do an IPO in the US or perhaps in greater Europe or in London," that's automatically going to be a bit of a pull for a company on a valuation and the ability to raise capital. And then from there you can kind of zoom in on the markets that are available to you and why they may be of benefit. In your particular case, you look at a French company looking at a US listing, for us, at the end of it, value prop that we bring forward, and it's really about putting each of our marketplaces around the world to work.
So, you list with CBOE in the US, you're not just getting a US listing. We're on par as a tier one marketplace with our peers and there's a number of other differentiators that show up in our business for the US specifically, but it's about how do you gain access to the world's largest shareholder base in the most easy and efficient way possible? And for CBOE Global Markets, that means you list in the US, and we're going to be able to make that stock tradable for a company around the world. Today we can already do that in the United Kingdom and in Amsterdam in Euros for pan-European investor access. In addition to that, end of next year we anticipate being in position to do that in Australia, and early in the year after, in Japan.
And if you think about a company's goal and ambition in going public, it's to find new investors. It's to ultimately make the company most accessible in an easy and simple way to the largest group of people possible. I mean, the company's got to do their part in marketing their business out to the street, but at the end of it, if they can't find you or they can't get access to you, you're not going to attract that shareholder. I think that's the biggest differentiator that a CBOE listing will put in front of public companies for the next decade.
Andrew Bond:
That's great. Yeah, no, and I can speak from personal experience for companies who operate globally, to be able to access capital and to be able to provide liquidity for their shareholders, different markets around the world, is absolutely invaluable. In keeping with that, what would you describe the type of companies that would be a good fit in the CBOE marketplace? And in what companies so far... I know you're growing kind of network of exchanges, but who are some of the larger, most significant companies that you currently have listed on the CBOE?
Erik Sloane:
Certainly. Around the world today, CBOE represents 1,900 unique tiers today. We are not new to the business of listing things. Where we've spent our time over the last decade or so has been on one of the fastest growing vehicles in investment management around exchange traded funds or ETFs, and that represents the majority of our listings around the world, but in recent years we've turned our attention to the public company space and using our Canadian business as a blueprint for the public company world, where we've developed a target market and real benefit to the street has come from companies that we define as the purpose driven innovation economy companies. It's a bit, Andrew, what you described: global management teams, global investor bases, maybe global business. Somebody who's disruptive, different, really thinking about the world of tomorrow or the economy of tomorrow and try to solve some of the world's more interesting and challenging problems.
We're just doing something ultimately different and disruptive with a purpose, and a few examples of that, not that these are the only ones, but companies that have sought a listing with CBOE around the world range from first movers in carbon offsets as a business. We've seen bio farming and clean tech, folks that are trying to solve some mental challenges in the world in society as we reside today. We've got businesses in EV technology and EV cars and battery metals, things that all feed into the clean economy of the future. Those are things for us where we're spending our time, energy and attention working to attract management teams to list with CBOE around the world, but I'll say this. Like any good stock exchange, we are agnostic to sector or industry.
We don't want to take a view on a business. We want companies to be able to facilitate access to capital through an exchange as easily as possible. While we're focused on things that have longevity and a good story for the future of our lives, we're also very much aware of the fact that there are some great businesses that really not as interesting for a retail or do it yourself investor perspective, but still incredible businesses in manufacturing and industrials, stuff that's working to make competition really happen in industries that haven't yet been disrupted. That's where we're spending our time.
Andrew Bond:
Great. Great. And to kind of pivot a bit, one of the issues that I know comes up a lot in my practice, or a lot of questions, I guess, I should say that I get from executives is the regulatory hurdles in global capital markets, in the sense there's not a lot of uniformity between different jurisdictions. And so, how does the CBOE try to smooth that over and what would you say currently are the biggest regulatory hurdles that are affecting companies that list on the CBOE markets, and in particular companies that are looking to list on a number of different options within the CBOE?
Erik Sloane:
That's actually a very topical and excellent question. I'll maybe separate it into two pieces, one which I can't address. The regulators at each country that a company chooses to formally apply to list in are the regulatory bodies that a company needs to interact with and address, and for the most part, there's some similarity or comparability. Canada and the US, as an example, have a system called MJDS, or Multi-Jurisdictional Disclosure System, where a company can efficiently maintain their disclosure between the SEC and the US and the Canadian securities regulators more broadly. But that interpretation or that system doesn't necessarily exist other countries, Europe, London, or the United Kingdom, rather, and Australia and the US. It's really the US regime that is applied when a company applies to list here.
From an exchange perspective, there's a lot of efficiencies that we are now working to drive in the system, and that comes down to probably two things. One, listing standards. Every market, if you don't operate in other countries, usually has their own individualized take on the types of companies and the gating criteria they wish to apply to a company that wishes to list. And for us, we're working now to standardize those gating criteria across every single market we operate, so that listing standards or the ways a company can list will be identical at a macro level, and then of course we're going to introduce some market or region-specific nuances. As an example, the US, the deepest liquidity pool in capital markets in the world for the majority of industries. As a result, listing standards tend to be a little more elevated into the US market, and if you step outside the US, like in Canada, the United Kingdom, or even Australia, some of those financial metrics get backed off a bit to reflect the fact that those economies are inherently smaller than the United States, and as a result, the businesses are smaller.
It doesn't mean they're of less quality or caliber or eligibility. It just means we need to back off the entry criterium. But the long term goal for us, and I think this is really the key point to hit on, there is no other exchange operator in the world that really cares about standardizing the exchange regime across countries to create a single, ideally, listing manual that a company is going to be able to adhere to, should they wish to dual list or what we're calling intra listing within the CGOE group of countries or companies, and having that standard rule book that a company can open and say, "Okay, I'm listed in the US and Canada." One rule book to work on and everything is as similar as it can be, minus a few nuances which we're going to highlight to the company.
Now, there comes a day, Andrew, where we can have an influence on the regulators and create some equivalence. That's the holy grail. And again, there I think we're the only market that is going to be motivated to try and find ways to create that, we'll call it equivalence for a moment, where international regulators acknowledge and work together with us to create a framework where a company can leverage what they're doing in one country to streamline their listing process and disclosure in others. We're going to work to that goal.
Andrew Bond:
Great. And I can vouch that a lot of my clients would certainly be in favor of that, because as somebody who practices almost exclusively dealing with international companies it really is a minefield out there when it comes to capital markets. This is actually a good lead into the next question here. I want to go back to this hypothetical French company that, let's say, is successful listing in the United States, gets through the SEC registration process and becomes listed on CBOE in the US. What would be the process for expanding that listing? Say hypothetically they do an IPO in the US. They go through the IPO process, become a SEC 34 Act reporting company and become listed on the CBOE in the US, what's the process if they want to expand their listing to another market, let's say in Europe or the UK or Australia? If you could briefly maybe summarize what the process would be in order to essentially become admitted to another jurisdiction outside of the US.
Erik Sloane:
A company's got two options to consider. If they need to raise capital in foreign countries, they're going to need to effect a listing in another region and follow the local regulatory framework. So, use the UK as an example, they would need to file the appropriate disclosure documents with the FCA and ultimately attempt to raise capital through an investment bank or a family office or institution ultimately to attract capital into that business. The regulators are one piece, and again, they're following the local regime. From an exchange perspective, if they're listed with CBOE already, we're working to share our already filed disclosure documents, background checks, all the due diligence we've done on the business internally to our other market, so that a company really has a seamless experience in working with other markets around the world.
Some basic form information that gets filled in, but a lot of the homework that's already been done to apply and list on CBOE US is a portable element that we can share with our listings qualifications teams around the world. So that should streamline a lot of work for the company and partners in getting listed abroad. That's the hard way if you need to raise capital. The easy way, if you don't need to raise capital, is we will actually leverage our foreign markets and stand up a ticker in London for a US listed company in Amsterdam, and end of next year, also in Australia, so that a company can ultimately enable secondary liquidity. Not raising capital, but trading existing shares that were issued out of the US in foreign markets, and really test out some strategies around is the company interested or interesting to local investors before they really go in and effect a listing and try and raise capital, which obviously comes with a more significant investment in time, energy and money, without a guarantee of success.
We're giving a company a nice way to put their toes in the water, try out foreign markets, and really get a feel for whether or not their business has the attraction and interest for institutions and retail investors alike before they go and apply to list formally inside of a foreign market.
Andrew Bond:
Great. What would you say right now? I know you're still growing as an organization, but you have had some substantial accomplishments so far. And I can speak from that personally, from my experience and from my clients that are currently listed on your exchanges. But what would you consider so far, at least, from your perspective to be the biggest successes for the CBOE right now? And conversely, what do you see has been your biggest challenges?
Erik Sloane:
The big one, if I take the second question first, biggest challenge is awareness. It's been spending a lot of time with the working group, lawyers in particular, and investment bankers second to that, about the fact that there is actually choice inside every single country CBOE's operating in. Especially when going public, people are very used to just doing what's been done before and not thinking twice about it, but markets of late have given rise to some interesting exploring options and really kind of refreshing and learning more about what else can be done to support a going public company. That's where the team and I have been spending a lot of time just educating the channel, the service partners of public companies, that they have a choice and here's what we can do for you and your aspiring going public clients, and really putting that CBOE Global Markets brand in the mix for a conversation with a company.
When you think about successes, for us, we have been working hard, I think our Canadian business firing on all cylinders now. It's had a great head start and actually terrific start already to this caliber year. In the US we've been working to bring more listings out of that business. We've got our first company that's not our own stock listed in December, inside the real energy space. They do solar panels, so right inside the market we like to operate. And we're already getting extraordinary interest in our European business and in London, from companies that are just looking for change. They want somebody that wants their business and they're incredibly excited at the prospect of working with CBOE and really opening up that global liquidity picture, but they look at us as far more than just an exchange.
This is really, in the methods we've been working to leave behind. We're here for you to get you listed and we're also here after, and there's nothing, frankly, that rewards that success and that feeling more than a client, a company, and their partners telling us, "Hey, you guys have done a great job. Company is really happy with this listing and they're going to be clients of yours for a very, very, very long time." There's nothing that puts a smile on my face more than happy clients.
Andrew Bond:
Yeah. I could vouch for that. From a lawyer's perspective, always want clients to be happy. That actually leads me to my next question is, other than recommending a capable capital markets attorney to help them, what would be your number one piece of advice for either a private company that wants to go public on a CBOE market or a company that's currently trading on another market that's considering making a move?
Erik Sloane:
My single piece of advice is it's never too early to start the conversation. Going public, if you're talking about your first example, is not at three to six months, "Hey, woke up this morning and we're going to be public in three months’ time." As a CEO, as a manager team, as a board, a group of advisors around a company, that process and procedure has got to start six, 12, 18, even 24 months before you decide you want to go public, in many cases. That's a function of getting the right partners around you. Starting to identify investment banks, investor relations firms, policies, procedures, getting your financials in order so that when it comes time to work, Andrew, with you and the team at Sheppard Mullin, most of the things that a company might be after or looking for either well in hand on being developed or ultimately on the checklist of things to get through. And frankly, nobody better to have that plan of attack ready and quarterbacked than their legal partners as the center point for all that exercise getting done efficiently, on time, and to a deadline.
But I'd say also, a conversation with the market. When you look at where folks are heading, where industries are heading, knowing where your value may be, and that's going to be country specific, and then what's interesting to the market right now, that kind of forethought and that could be six months to a year in advance, also important in knowing what you need to chin up to as far as a guarantee or as close to guaranteed as you can get, highly probable ability to get into a public market. So, setting your goals, like any good management team should. One year, two year, five years out. That conversation's got to start early and you've got to pick your partners very, very carefully. There's a lot of good people in this world and knowing which ones to work with to achieve your objective as a team is probably the most critical thing I can leave behind for our listeners today.
Andrew Bond:
Now, I can say from personal experience that that's great advice. I think this was very informative, Erik. Thanks for joining us on this. As I've mentioned to you, I've worked with you a lot before. I have a number of clients that are listed on CBOE markets and have been taking advantage of this global system that you've developed. And I think as a securities practitioner, I think it's extremely exciting. I think it provides a lot of value for companies, and I'm hoping as you're looking to continue to expand in new markets, I think it's going to provide even more advantages for companies to raise money globally and to develop global liquidity. Do you have anything else you would like to add for our listeners as to things to consider or what CBOE offers or just any kind of parting thoughts?
Erik Sloane:
My biggest one is keep asking questions, and at the end of it, the team and I absolutely love the educational conversation, any time we get an opportunity to get in a room and share a bit about what's going on. It's not just about what's happening in our business. It's a landscaping discussion to show folks, hey, these are the opportunities and options available to you, not only within our business but across the public company ecosystem. And for us, getting educated is the biggest thing I would definitely close on, and certainly for us it's a lot of fun, educating folks on what they can do inside of public markets around the world. We're really excited to be a part of that ecosystem. And Andrew, in closing words from my end, really appreciate you having me on the podcast today, and you and the Sheppard Mullin team support globally for our business. Getting the word out, our first priority, and this kind of platform is exactly the conversation we need to keep having in the year ahead. So really grateful for the chance to chat with you today.
Andrew Bond:
Yeah, no, I think this has been great. I think it's been very informative, and looking forward to continuing working with you and your team.
Erik Sloane:
Likewise. Thank you so much.
Andrew Bond:
Thanks, Erik.
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