Catherine Clay, global head of derivatives at Cboe

The new options on VIX futures will offer investors an additional tool to help manage US equity market volatility. They complement Cboe’s existing securities-based VIX index options, which are designed to provide similar risk management and yield enhancement capabilities.

The new product uses an option-on-future structure, which could potentially allow more market participants, including those restricted from accessing securities-based options, to trade a VIX options product.

Cboe’s VIX Index options have seen record trading volumes over the past two years, with average daily volumes reaching over 851,000 contracts in 2024, up roughly 60% when compared to 2022.

“Investors have long utilised VIX options and VIX futures to help hedge and manage volatility exposure, and Cboe is proud to expand our volatility product suite at such a critical time,” said Catherine Clay, global head of derivatives at Cboe.

“The launch will complement our existing volatility offerings, including the recently launched Cboe S&P 500 Variance futures, and enable more investors with the ability to help manage volatility and risk through the election season and beyond.”

Read more: Cboe set to launch new Cboe S&P 500 Variance Futures

Cboe Global Markets added that options on VIX futures will have a European-style exercise, PM settlement and physically settle into front-month VIX future.

The contracts will be regulated by the Commodity Futures Trading Commission (CFTC) and cleared by The Options Clearing Corporation (OCC).

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Rob Hocking

The new futures aim to provide market participants with an additional tool to calculate implied volatility of the US equity market as measured by the S&P 500 Index, and to manage volatility risks and express directional views.

The futures are designed to offer an improved approach to trading the spread between implied and realised volatility, allowing users to take advantage of discrepancies between market expectations and actual outcomes.

“The launch of Cboe S&P 500 Variance Futures comes at a crucial time when risk management is top of mind for many market participants, amid the backdrop of the upcoming US election, shifting monetary policy and ongoing geopolitical tensions,” said Rob Hocking, head of product innovation at Cboe.

“As demand for hedging and income generation rises, our goal is to broaden access to the derivatives markets by simplifying complex, capital-intensive strategies and making them more easily tradable in an exchange-listed, centrally cleared environment.”

Cboe Global Markets expects the new futures to appeal to a wide range of market participants with a wide range of investment objectives, including volatility traders and hedge funds seeking capital efficiency and transparency; institutional investors managing equity volatility risk and expressing directional views; portfolio managers aiming for enhanced diversification and risk premia capture; and dealers and market makers transitioning from OTC variance swaps to standardised products.

“Having traded variance since 2002, being able to trade a simple cleared variance product will be a very welcome addition to our portfolio,” said Keith DeCarlucci, chief investment officer at Melqart Asset Management.

Read more: Cboe to launch options on Cboe Volatility Index futures

The Cboe S&P 500 Variance Futures contracts will settle based on a calculation of the annualized realized variance of the S&P 500 Index.

The realised variance will be calculated once daily from a series of values of the S&P 500 Index beginning with the closing index value on the first day a VA futures contract is listed for trading and ending with the special opening quotation (SOQ) of the S&P 500 Index on the final settlement date of that contract.

Cboe Global Markets added that the contracts will quote and trade directly in variance units, offering a simplified approach to managing and trading variance exposure.

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SBI will transfer its 14.8% ownership interest in Japannext to Cboe, subject to regulatory approval.

“Cboe, a global trading solution provider and market operator, will become a new shareholder of Japannext. We believe that this will promote innovation in the Japanese capital markets in ways that increase competitiveness, reduce trading costs and provide more choices for investors,” confirmed Masakatsu Yamada, representative director and chief executive at Japannext.

Japannext provides financial services and market solutions focused on operating an alternative market.

Read more: Cboe Global Markets to launch US Treasury market volatility index

“Japan is one of the world’s largest and most important capital marketplaces and this investment reaffirms Cboe’s strong commitment to Japan,” said Fred Tomczyk, chief executive at Cboe Global Markets.

“We believe this investment will help us strengthen our relationships within the industry and expand our presence beyond our ownership of Cboe Japan, which we plan to continue to operate independent of Japannext.”

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The expansion will mean that the exchange will publish intraday values for its 20+ Year Treasury Bond ETF Volatility Basis Point Index (VIXTLT).

The index leverages Cboe’s proprietary VIX Index methodology and provides participants with the ability to track 30-day expected volatility in the US Treasury market in real-time.

Cboe confirmed the expansion of its monitoring capabilities would support participants in the lead up to the regime shift expected to be caused by the election in the US in November, alongside continued interest rate led volatility in the region.

“Market participants have long sought a VIX-like gauge for US Treasury volatility, and with the US election and the Federal Reserve’s expected monetary policy shift looming, interest in this asset class remains high,” said Rob Hocking, head of product innovation at Cboe.

“With both the VIXTLT and the VIX indices utilising similar methodologies, investors will be able to gain a more like-to-like view of expected volatility in the bond and equity markets, potentially enabling them to make more informed decisions.”

In light of rising client demand, Cboe confirmed the VIXTLT index is available in basis point volatility terms and aims to provide an absolute measure of volatility. The index is calculated using listed options on the iShares 20+ Year Treasury Bond ETF (TLT).

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Rob Hocking

Cboe currently offers securities-based VIX Index options, allowing investors to manage or gain exposure to broad US equity market volatility.  

The new options on VIX futures will offer a similar utility but will be based on front-month VIX futures.  

With futures as the underlying asset, these options will be CFTC-regulated, allowing for a range of market participants that are restricted from accessing US securities-based options to use this new offering to state their views on equity market volatility.

“As the pioneer in volatility trading, Cboe continues to expand its VIX complex with additional products and services targeted at helping market participants better manage portfolio risk and trade volatility,” said Rob Hocking, head of product innovation at Cboe.

“[…] With the US election quickly approaching, which has historically been a meaningful volatility catalyst for markets, we expect these tools will help meet customer demand to effectively manage risk.”

Read more: Cboe posts solid Q2 results with strong performances across derivatives and cash and spot markets

The new options will be European-style, meaning they can only be exercised at expiration, alongside being physically settled into front-month VIX futures.

They are expected to complement the existing VIX Index options, allowing customers to have more choice in expiration dates and enabling more granular hedging strategies.

Users of options on VIX futures will have the ability to hedge those positions using front-month VIX futures and standard VIX Index options.

“By listing these options on Cboe’s US futures exchange, CFE’s global network of FCMs and brokers can trade them using the same connections and memberships already established for trading VIX futures, thereby enhancing ease and accessibility,” added Catherine Clay, head of global derivatives at Cboe.

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The new index will be calculated using listed options on the iShares 20+ Year Treasury Bond ETF (TLT) and will enable market participants to track future expected volatility in the US Treasury market.

VIXTLT Index will be available in both percentage price volatility and basis point volatility terms.

The new offering expands Cboe’s volatility index suite and adds to Cboe’s current offering of more than 450 derivatives-based indices, covering various strategy benchmarks and asset classes.

TLT is an exchange-traded fund (ETF) composed of US Treasury bonds with remaining maturities exceeding twenty years that have a relatively high duration.

Highly liquid options on TLT with a wide range of strikes provide information on investors’ potential viewpoints on the future of US interest rates. This is then distilled by the VIXTLT Index methodology to one number designed to represent a consensus view on expected US Treasury volatility.

“Cboe offers a comprehensive ecosystem of services, touching every aspect of the customer experience – from market access and data, to tradable products and beyond,” said Rob Hocking, senior vice president and head of product innovation at Cboe.

“By combining our derivatives expertise with leading indexing capabilities, we are able to identify gaps in our product offering and utilise our robust technology, data and customer feedback to continuously drive product development that meet customers’ needs.”

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The new development builds on an existing relationship between the two firms, leveraging their combined expertise to develop new derivatives products. This could potentially start with cash-settled index options tied to the FTSE Bitcoin Index and the FTSE Ethereum Index.

As part of the collaboration, Cboe plans to list cash-settled index options on FTSE’s indices – subject to regulatory approvals – which will target increased investor demand for exchange-traded derivatives to manage crypto exposure in a US-regulated trading environment.

“Our expanded relationship today mirrors that successful model of collaboration, combining Cboe’s unrivalled derivatives expertise with FTSE’s world-class indexing capabilities to potentially bring new solutions to the digital assets space,” said Catherine Clay, global head of derivatives at Cboe.

“[…] As these two asset classes converge, we look forward to driving continued innovation and our relationship with FTSE Russell will be key to this strategy.”

The FTSE Bitcoin Index and FTSE Ethereum Index are part of the FTSE Digital Asset Indices series, developed in partnership with Digital Asset Research (DAR).

These indices capture the performance of bitcoin and ether, as determined by the FTSE DAR Reference Price, offering exposure to the digital asset market.

“We are delighted to continue working alongside Cboe Global Markets, realising our mutual commitment to enable new asset innovation in financial markets,” said Fiona Bassett, chief executive of FTSE Russell.

“Our indices are used by some of the largest crypto asset managers in the world for their best-in-class data and processes built to manage regulatory and trading risk – critical differentiators for the data in this asset class.”

Cboe added in a statement that it plans to share more details about its intentions for cash-settled index options on the FTSE Bitcoin Index and the FTSE Ethereum Index potentially later this year.

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Cboe iBoxx $ Emerging Market Bond Index futures will be listed for trading on  17 June. The new futures will be based on the S&P Dow Jones Indices’ iBoxx USD Liquid Emerging Market Sovereigns and Sub-Sovereigns Index.

The exchange operator confirmed the futures are designed to offer investors exposure to US dollar denominated bonds issued by governments or sub-sovereign issuers from emerging markets.

They could also be used to hedge existing exposures, implement relative value strategies against other fixed income instruments or manage interest rate and credit risk for current and potential emerging market debt investors.

The futures will be exchange-traded and centrally cleared. Cboe confirmed this will limit counterparty risk compared to over-the-counter instruments. They will be cash settled and available to trade almost 24-hours per weekday.

Cboe Futures Exchange will be listed for trading up to four near-term serial contract months and four contract months on the March quarterly cycle for the futures.

“Cboe changed the way investors traded volatility 20 years ago with the launch of VIX futures, and today we continue to innovate and strategically offer new ways to manage risk across asset classes,” said Rob Hocking, senior vice president and head of product innovation at Cboe Global Markets.

“Whether investors or fund managers are looking to hedge current positions or gain broad exposure to the market for bonds issued by governments or sub-sovereign issuers from emerging market countries, IEMD futures are designed to provide that exposure in a US regulated and capital efficient manner.”

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The three new MSCI index options – namely Cboe MSCI world index option (MXWLD), Cboe MSCI ACWI index options (MXACW) and Cboe MSCI USA index option (MXUSA) – are designed to provide investors with exposure to international, developed and emerging markets, and US equity market performance.

Pension funds, insurance companies and other institutional investors will be provided with more efficient ways to hedge their global equity exposure, while minimising potential trading error and currency risk.

Each of MXWLD and MXUSA are based on a fraction (1/100th) of the value of its underlying index, which Cboe claims will make these options more accessible for retail investors.

“As more investors seek global equity exposure, adding three new options on MSCI’s world renowned benchmarks was the natural next evolution for Cboe’s suite of index options products,” said Catherine Clay, head of global derivatives at Cboe Global Markets. “

“Whether investors are looking to hedge their portfolios, generate yields, or make directional trades, we have seen heightened interest in the optionality derivatives can provide. These new index options, and the MSCI volatility benchmark indices launched recently will provide important tools in helping investors manage their global exposures.”

For portfolio managers running options overlay strategies, the recently launched index options will allow investors to expand their overlay programs to their global portfolio, alongside diversifying the sources of potential income in their portfolio.

Cboe added that a potential benefit of overwriting the newly launched MSCI index options include their European-style cash settlement, which helps to eliminate risk of early exercise and physical settlement.

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Catherine Clay

Specifically, the initiative will expand Cboe’s suite of Cboe-MSCI index options and volatility indices, introducing five new products.

Three are based on additional MSCI global indices: Cboe MSCI World Index Options (MXWLD), Cboe MSCI USA Index Options (MXUSA), and Cboe MSCI ACWI Index Options (MXACW), while two others will broaden its volatility index suite with new Cboe MSCI volatility indices: Cboe MSCI EAFE Volatility Index (VXMXEA) and the Cboe MSCI Emerging Markets Volatility Index (VXMXEF).

The volatility indices are designed “to provide a transparent measure of the market’s expectation of 30-day implied volatility by these respective MSCI index option classes”. 

The new three new options tied to MSCI’s international, developed, emerging and US markets benchmark indices are set to begin trading on 18 March, pending regulatory approval, and have been integrated into Cboe’s existing infrastructure and will be traded and settled via the same exchange connections and clearinghouse as the current Cboe MSCI index options. 

Read more: Cboe and MSCI plan options growth following partnership extension 

Catherine Clay, global head of derivatives at Cboe, asserted: “In today’s rapidly evolving landscape, investors require sophisticated tools to navigate the markets with confidence. Our ongoing collaboration with MSCI reflects our shared commitment to fostering innovation and providing solutions that empower investors to better manage risk and seize potential opportunities in the global marketplace.

“[…] Crucially, the three new index options, which cover developed and emerging markets, are expected to also give investors comprehensive access to gain a variety of different exposures around the globe.”

The new options will be based on the MSCI World Index, the MSCI ACWI Index and the MSCI USA Index. In addition, both the MXWLD and MXUSA options are set to be based on 1/100th of the value of their underlying index.

On the third Friday of the month, MXACW, MXUSA, and MXWLD standard options will expire, while Cboe is also planning to list five end-of-week expirations, expected to begin trading on 21 March 2024.

George Harrington, global head of derivatives licensing at MSCI, highlighted how the expansion of the strategic relationship with Cboe will assist investors around the world with managing risk and exposure.

“The launch of the Cboe MSCI EAFE Volatility Index (VXMXEA) and Cboe MSCI Emerging Markets Volatility Index (VXMXEF) provides the investment community with benchmarks for option investing, and Cboe’s launch of options linked to the MSCI World Index, MSCI ACWI Index and MSCI USA Index further develops the ecosystem of tradable products.”

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