CBOE CEO Edward Tilly on Growing the Volatility Space

Day Two of CBOE RMC Europe kicked off with a welcome from CBOE CEO Edward Tilly. He said the agenda for RMC reminds him that “we are really at the beginning of the evolving VIX story” and highlighted several new CBOE initiatives designed to continue to grow the volatility space.

Tilly noted that “though, by definition, a measure of U.S. market volatility, VIX has become the de facto measure for market volatility worldwide.   The global reach of VIX can be seen by the early and very favorable response to our Extended Trading Hours initiative in VIX futures.”

Late in 2013, CBOE introduced expanded trading hours for VIX futures, adding 5 hours and 45 minutes to the trading day. In June, trading hours for VIX futures were further expanded to nearly 24 hours, which accommodates Asian market hours and a growing worldwide user base. Tilly said that presently, nearly 10 percent of all VIX futures trading takes place outside of regular U.S. trading hours and on days when global events trigger higher volatility, it can be as high as 20 percent.

Tilly noted that CBOE is prepping to launch extended trading hours for SPX and VIX options later this year, pending regulatory review and completion of necessary systems enhancements. The new session will run from 2:00 a.m. to 8:15 a.m., Chicago time.

Tilly then made the first of two announcements – CBOE Futures Exchange (CFE) will launch futures on the CBOE/CBOT 10-year U.S. Treasury Note Volatility Index (VXTYN), the first volatility index based on U.S. government debt, on November 13. He noted that VXTYN futures “can enable customers to better manage interest-rate risk.”

Turning to the continued growth in CBOE’s S&P 500 Index (SPX) options complex, Tilly highlighted the remarkable growth in SPX Weeklys, which now average over 250,000 contracts per day – one-third of all SPX options traded. This set the stage for the morning’s second announcement – on October 6, CBOE will begin to include SPX Weeklys option series in the CBOE Volatility Index calculation.  Tilly said the inclusion of SPX Weeklys “will allow VIX ‘spot values’ to be calculated with the S&P 500 Index option series that most precisely match the 30-day target timeframe for expected volatility that the VIX Index is intended to represent. The robust market in our SPX Weeklys product enables that change and makes it a meaningful one.” This enhancement does not impact the tradable VIX products or the final settlement values.

The press releases for both announcements will be available here later today.

Tilly concluded his remarks by saying that CBOE truly values the setting at the Risk Management Conference. “By working closely with customers like you, in forums like this one, we can continue to create products and services that add value to your trading experience and expertise. Over the years, we’ve received great feedback and suggestions from RMC participants on ways to improve products and services.” We’d expect this year to be no different.

RMC is in full swing. See www.cboermceurope.com for more highlights.