CBOE forms Vix network, launches new contracts

CHICAGO and BOCA RATON, Fla., March 16, 2011 /PRNewswire/ -- The Chicago Board Options Exchange (CBOE) and Standard & Poor's (S&P) announced the formation of VIX Network, a global network of exchanges with agreements regarding use of CBOE's VIX® methodology.

The group's inaugural meeting is being held today in Boca Raton, Florida, where exchange leaders from around the world were among the attendees of the 2011 Futures Industry Association (FIA) Conference.

VIX Network is being formed to provide an information-sharing venue for current and potential users of the VIX methodology and to promote VIX as the global standard for measuring market volatility.

The meeting agenda includes a discussion of the ongoing development of VIX Network and its mission as well as a presentation on the history of the CBOE Volatility Index® (VIX®) and VIX products, including obstacles encountered along the way and how CBOE overcame them to create its now highly successful VIX product line.

"The development of VIX was hardly an 'overnight success'. In sharing CBOE's experience in launching and managing VIX futures and options contracts, we hope to assist other exchanges in the development of successful volatility products in their own markets," said William J. Brodsky, CBOE Chairman and CEO. "We are very excited about exploring ways we can work together to grow the volatility space around the world using the VIX methodology."

"The concept of measuring and trading volatility is still a relatively new frontier," said Robert Shakotko, Managing Director at S&P Indices. "Many exchanges around the world are contemplating or actively working toward establishing volatility indexes and volatility products in their respective markets. We believe that the opportunity to discuss the opportunities and challenges that arise at different stages of development among various markets will be of benefit to all."

Currently, agreements related to the use of the VIX methodology are in place with the Australian Securities Exchange, CME Group, Deutsche Borse, Hang Seng Indexes in Hong Kong, National Stock Exchange of India, Euronext LIFFE, Taiwan Futures Exchange, and the TMX Group in Canada.

CBOE created the CBOE Volatility Index (VIX) in 1993, and began to publish values using the current VIX methodology in 2003. VIX, popularly called the market's "fear gauge," has since become the premier global measure of market volatility. CBOE's affiliate CBOE Futures Exchange introduced VIX futures in 2004 and CBOE introduced VIX options in 2006, giving market participants the ability to "hedge" and "trade" market volatility. Trading in VIX futures and options continues to grow at a record-breaking pace. Thus far in 2011, VIX options are trading an average daily volume (ADV) of nearly 385,000 contracts, and VIX futures are trading nearly 40,000 contracts per day.

CBOE Extends Its Volatility Franchise: Applies VIX Methodology to Six Active ETFs

CHICAGO and BOCA RATON, Fla., March 16, 2011 /PRNewswire/ -- The Chicago Board Options Exchange (CBOE) announced that beginning today, it will apply its proprietary CBOE Volatility Index® (VIX®) methodology to options on six highly-active, sector-specific exchange-traded funds (ETFs):

  • iShares MSCI Emerging Markets Index Fund (Ticker: VXEEM)
  • iShares Trust FTSE China 25 Index Fund (Ticker: VXFXI)
  • iShares MSCI Brazil Index Fund (Ticker: VXEWZ)
  • Market Vectors Gold Miners Fund (Ticker: VXGDX)
  • iShares Silver Trust (Ticker: VXSLV)
  • Energy Select Sector SPDR (Ticker: VXXLE)

The new benchmarks, which offer an important new measure for investors wanting to monitor volatility in specific sectors for ETFs they hold in their portfolios, are designed to measure the expected volatility of the respective ETF options.

Each of the ETFs is in the top 20 of ETF options trading volume. Values on the six new volatility ETF benchmarks will be disseminated daily — every 15 seconds — through CBOE's website— www.cboe.com/EquityVIX -- as well as through all major data vendors.

The addition of these new ETF volatility benchmarks follows CBOE's successful application of its VIX methodology to individual equities options when, in January 2011, it began publishing volatility values on Apple, Amazon, IBM, Google and Goldman Sachs. CBOE may expand the list of both ETFs and individual equity options on which volatility values may be calculated in the future, depending on investor demand.

CBOE, known as the home of volatility indexes, currently publishes data on more than a dozen different volatility-related benchmarks and strategies. In addition to publishing volatility values on options of individual equities, CBOE has launched three initiatives in the volatility sector since the beginning of 2011:

On February 28, CBOE announced plans to launch futures and options on the CBOE Gold ETF Volatility Index (GVZ). Pending regulatory approval, CBOE Futures Exchange (CFE) will begin trading GVZ futures on Friday, March 25, and CBOE will introduce GVZ options a few weeks later.

  • On February 23, CBOE began publishing values for the CBOE S&P 500 Skew Index (ticker symbol: SKEW), a benchmark measure of the perceived risk of extreme negative moves -- often referred to as "tail risk" or a "black swan" event -- in U.S. equity markets. See www.cboe.com/skew for more information.
  • On January 14, CBOE launched a web page displaying CBOE Volatility Index (VIX) term structure data, calculated every 15 seconds throughout the trading day. For more information, see http://www.cboe.com/data/volatilityindexes/Default.aspx.

CBOE to Launch Options on Volatility Indexes of Individual Stock and Crude Oil ETFs

CHICAGO and BOCA RATON, Fla., March 16, 2011 /PRNewswire/ -- The Chicago Board Options Exchange (CBOE) today announced that it has filed for Securities and Exchange Commission (SEC) approval to list options based on recently-created volatility indexes that track individual stocks — Apple (AAPL), Amazon (AMZN), Goldman Sachs (GS), Google (GOOG), and IBM (IBM) — using CBOE's widely-followed CBOE Volatility Index (VIX) methodology.

"Stock VIXes," first introduced in January as volatility benchmarks, have allowed investors to track individual stock volatility with a quantifiable measurement for the first time. Pending regulatory approval, investors will have the ability to trade options contracts based on the volatility component of the individual stock.

In addition, CBOE's rule filing would permit the trading of options on the CBOE Crude Oil ETF Volatility Index (OVX), based on United States Oil Fund (USO) options. The CBOE Crude Oil ETF Volatility Index (OVX) has been calculated and disseminated by the CBOE since 2008 and, pending approval, will have a tradable contract tied its benchmark, allowing investors to hedge the risk of volatility in the active oil sector for the first time.

"As the pioneer in the volatility space, CBOE is committed to developing a wide variety of innovative tools that can help investors measure and potentially mitigate, volatility in their portfolios," CBOE Chairman and CEO William J. Brodsky said. "Our benchmark indexes and strategies, combined with our volatility futures and options products, have become broadly recognized and accepted by investors, and these new products will provide even more ways to manage volatility across a variety of asset classes."

In the SEC filing, CBOE requested the ability to list options on up to 40 different volatility benchmarks of individual equities and certain exchange traded funds (ETFs) that could be created by CBOE. The products announced today are the first of those 40 products.

CBOE Futures Exchange (CFE) also plans to list futures contracts on volatility benchmarks that have been approved for options trading, but has not yet filed with the Commodity Futures Trading Commission (CFTC) for approval.

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