CBOE Holdings President and COO Edward Provost kicked off Day Two of CBOE RMC U.S. with an update on recent CBOE developments, highlighting numerous CBOE initiatives designed to create new trading opportunities for investors.
Provost began by announcing CBOE’s plans to launch FLEX index options with Asian and Cliquet style settlement, citing their relevance to RMC participants working in the insurance field. “Asian and Cliquet FLEX index options are designed to give insurers an alternative hedging tool that provides exchange-traded benefits, including enhanced price discovery, transparency and centralized clearing,” Provost said. “Transacting on an exchange may also provide insurance companies with improved execution prices on their hedges, while simultaneously reducing counterparty risk.” CBOE plans to launch the new products March 21.
Provost then acknowledged three CBOE major index provider partners in attendance — S&P Dow Jones, FTSE Russell and MSCI — emphasizing their role in creating new tools for trading at CBOE.
Turning to CBOE’s flagship S&P 500 Index (SPX) and CBOE Volatility Index (VIX) products, Provost noted significant growth due to SPX Weeklys trading, and highlighted last week’s launch of SPX Weeklys with Wednesday Expirations. He also referenced the strong trading seen in VIX Weeklys options, which launched in October following the VIX Weeklys futures launch last July.
Provost also discussed plans to begin overnight (2:00 a.m. to 8:15 a.m. CT) dissemination of the spot VIX Index. The introduction of extended trading hours in SPX and VIX options last March enables CBOE to disseminate the spot VIX Index during that time. “The earlier calculation and dissemination of the SPX-VIX volatility information allows overseas investors to reference VIX during their regular trading hours and better facilitates trading in the overnight session,” he said.
CBOE is leveraging the potential of the CBOE/CBOT 10-Year Treasury Note Volatility Index (TYVIX) by creating an asset rotation strategy index called the Stabilis Index. “The Stabilis Index uses TYVIX and VIX as signals to dynamically allocate weights across equities, Treasuries, credit and cash,” Provost said.
Provost also spoke about CBOE’s growing FTSE Russell product line, discussing the planned launch of FTSE 100 and FTSE China 50 index options later this month. The FTSE Russell and MSCI products “further enhance a growing international dimension to CBOE’s index options franchise,” he said.
Later, Provost added, “We also continue to form alliances that enable us to efficiently diversify our product and business lines across new regions and asset classes.” He then described CBOE’s alliance with the London Stock Exchange Group (LSEG) and major dealer banks to launch and develop the CurveGlobal interest rate platform, which is expected to go live in the second quarter of 2016.
Provost also called the recent partnership with Vest Financial Group, Inc., “a potential game changer in options trading.” Vest is an asset management firm that provides options-based packaged products and develops technology solutions for options-based investments. “We are integrating CBOE’s products and strategy indexes within Vest’s platform, which substantially reduces the complexity of options trading while providing investors with targeted protection and enhanced returns,” Provost said, encouraging attendees to seek out Karan Sood, co-founder of Vest, for a demo of the platform.
Turning to trading enhancements, Provost announced CBOE’s new Frequent Trader program, a voluntary incentive program for trading in certain CBOE proprietary products, such as VIX and SPX, that is expected to be available to asset managers, individuals, insurance companies, mutual funds and other customers. “Our Frequent Trader program is designed to provide rebates on CBOE customer transaction fees based on the trading activity of each individual user and apply to VIX, SPX, SPX Weeklys and SPXpm options,” Provost said.
Provost also provided updates on CBOE Livevol and Tradelegs, which both had team members in attendance to answer questions and provide demos of their platforms. He then discussed the planned roll out of CBOE Vector, CBOE’s next generation of leading trade-engine technology in 2016.
“We opted to build CBOE Vector internally in order to engineer highly customized trading technology that delivers best-in-class functionality, low latency, ease of use and trading efficiency,” Provost said. “It also will handle increased message traffic and industry demand for additional functionality, such as risk controls.” The roll out of CBOE Vector will begin with futures at CFE, followed by options at CBOE and C2.
Provost highlighted CBOE’s educational commitment by referencing four recently released white papers that study CBOE Eurekahedge Benchmarks, CBOE SPX Options-Selling Indexes, Russell 2000 Options-Based Benchmark Indexes, and Weekly, Monthly SPX PutWrite Indexes. The papers are available at www.cboe.com/benchmarks.
Provost then emphasized CBOE’s commitment to investor advocacy. “We’ve been working closely with the fund community to reduce barriers to the use of options,” he said, citing how CBOE-commissioned research influenced Morningstar’s consideration of a new classification for mutual funds that use options. Provost also spoke about plans to issue a comment letter to the SEC regarding its proposed rule on the use of derivatives in registered funds, and invited attendees to discuss the issues with CBOE staff.
In closing, Provost lauded the success of the fist-ever RMC Asia at the end of 2015, and announced the 5th annual RMC Europe in County Wicklow, Ireland this September. “RMC affords us the unique ability to learn from and work closely with customers like you, which helps us create products and services that add power to your trading experience and expertise.”
The 32nd annual CBOE RMC is in full swing – follow coverage on Twitter with the hashtag #CBOERMC and check out www.cboermc.com throughout the conference for all of the latest news and highlights, including session blogs and CBOE TV videos.
The transcript of Edward Provost’s speech is available at http://www.cboe.com/aboutcboe/mediahub/speeches.aspx.