CBOE Holdings Inc., the largest U.S. options exchange operator, delayed the start of extended trading of its volatility futures because the U.S. government shutdown is preventing regulators from approving its plans.
The exchange had planned to introduce an additional session for trading on the Chicago Board Options Exchange Volatility Index, or VIX, futures starting on Oct. 21. The sessions were planned for Monday through Thursday from 4:30 p.m. to 5:15 p.m. New York time. In the second phase, beginning on Oct. 28, the exchange was due to open at 3 a.m. New York time on each weekday, CBOE said Sept. 30.
The exchange will delay the second phase, and may have to push back the first phase of extended trading if the U.S. Commodity Futures Trading Commission is not able to resume full operations until after Oct. 15, CBOE said in a notice to members today. CBOE said it will announce a new date after the government shutdown ends.
The exchange “is operationally prepared to proceed with these launch dates,” the company said in a notice to members today. “However, due to the government shutdown, the CBOE Futures Exchange must defer the launch of the second phase of expanded VIX futures extended trading hours.”
The U.S. government’s partial shutdown entered its third week. Congressional leaders have yet to reach an agreement on how to end the U.S. fiscal impasse amid mounting concern in financial markets three days before the government’s borrowing authority lapses. Senate Majority Leader Harry Reid said yesterday that he had a “productive conversation” with Minority Leader Mitch McConnell without reaching a conclusion on a plan to send to the Democratic-controlled chamber for a vote.
Rule Changes
The exchange “is unable to implement the rule changes related to the second phase of expanded VIX futures extended trading hours by Oct. 28 because the CFTC is not processing rule certification filings from designated contract markets during the government shutdown,” the company said in a notice to members today.
CBOE is trying to win more business outside the U.S. with the extended hours. A software update to prepare for the shift caused a malfunction that shut Chicago-based CBOE’s main market for three-and-a-half hours in April, prompting the company to delay the introduction of the longer trading hours.
VIX futures, which let traders speculate on the size of equity market price swings, have grown in popularity with the bull market in U.S. stocks in its fifth year. More than 322,000 of the contracts changed hands on Oct. 8, the fourth-highest level on record, according to data compiled by Bloomberg. Average daily volume this year is on pace for a record high.
The exchange on Oct. 1 also introduced the CBOE S&P 500 Short-Term Volatility Index that tracks nine-day options on the Standard & Poor’s 500 Index. The company’s most famous gauge, the VIX, measures 30-day options on the S&P 500.
CBOE controls exclusive rights to the VIX and leverages that position by offering options and futures on the benchmark gauge of U.S. equity derivatives.
