Edward Tilly
CBOE Chief Executive Officer
Risk Management Conference Europe
Opening Remarks
Thursday, September 4, 2014
9:00 – 9:30 a.m.
Thank you, Paul. And thanks to all of you for joining us for CBOE’s 3rd
Annual European Risk Management Conference. We are delighted to
be here in Ireland with you. We held our 30th annual U.S. Risk
Management Conference earlier this year, and we are thrilled now to
make RMC an annual event in Europe, as well.
RMC is uniquely focused on portfolio management strategy. We select
topics and speakers that we think will deliver content that will be of
interest and of use to you in today’s markets. Our trademark sessions
are conducted by -- and for -- market participants, and we limit the
number of speakers per session so that topics are covered in depth.
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Your participation is what makes it truly unique, and I want to thank
you for that. Before introducing our keynote speaker, I will share a few
VIX initiatives that I hope you find of interest.
This year’s agenda reminds me that we are really at the beginning of the
evolving VIX story. The opportunities that have emerged as a result of a
“tradable” VIX continue to shape the volatility space, and users here in
Europe are increasingly helping to define that space.
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, we lengthened the VIX futures trading day by 5 hours and
45 minutes to enable European-based customers to trade in their local
trading hours.
In June, we further extended VIX futures trading to nearly 24 hours to
accommodate Asian market hours, as well as a growing worldwide user
base. Now, an average of nearly 10 percent of all VIX futures trading
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takes place outside of regular U.S. trading hours. On days when global
events trigger higher volatility, we’ve seen that figure climb to more than
20 percent. We’re also seeing a good mix of customers early on, another
indicator of the broadening universe of VIX market participants.
We look forward to launching extended trading hours for SPX and VIX
options later this year. The new session for those products is planned to
run from 2:00 a.m. through 8:15 a.m., Chicago time -- or 8:00 a.m. to
2:15 p.m. London time -- Monday through Friday. There will be a 15
minute gap before regular U.S. hours resume at 8:30 a.m. The target
start date is the fourth quarter of 2014, pending SEC approval and
completion of necessary systems enhancements.
We continue to diversify our VIX product line to provide even moretargeted tools for risk management. Last year at this conference, we
announced the launch of our new Short-term VIX Index, ticker symbol
VXST. This year, we launched futures and options on the Short-term VIX.
Although the recent low-volatility environment has made for a slow
start in these products, we -- and I know many of you -- continue to
believe in the inherent utility of a short-term VIX product. To that end,
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we have launched targeted educational and social media programs to
more broadly expose customers to VXST, and how it relates to VIX.
We are also preparing to launch our next tradable VIX product in the
form of futures on the CBOE/CBOT 10-year U.S. Treasury Note Volatility
Index, the first volatility index based on U.S. government debt.
The VXTYN Index is calculated by applying our VIX methodology to
futures options data from CME Group's 10-year U.S. Treasury note
contract. We began disseminating the index values in May 2013, and I
am pleased to announce today that we will begin trading VXTYN futures
on November 13. We are thrilled to introduce a VIX futures product
that can enable customers to better manage interest-rate risk.
To a great extent, the dramatic growth story of VIX futures and options
has overshadowed the continued growth in SPX trading, which is being
driven by the tremendous popularity of our SPX Weeklys product.
First introduced by CBOE in 2005, Weeklys options are now available on
hundreds of indexes, equities, ETFs and ETNs, and have become a very
popular and actively-traded risk management tool. Today, SPX
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Weeklys account for one-third of all SPX options traded, and average
over a quarter of a million contracts per day.
Given the increasing significance of SPX Weeklys trading, I am pleased
to announce that on October 6, CBOE will begin to include SPX Weeklys
options series -- expiring every Friday, except the third Friday of each
month -- in the CBOE Volatility Index calculation. Currently, only SPX
options with monthly expirations are used in the calculation.
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.
While enabling the VIX Index to evolve and keep pace with changes in
the underlying SPX options market, this change will not impact our
tradable VIX products.
The final settlement value for VIX futures and options will continue to
use the same VIX formula and the opening prices of standard (i.e., 3rd
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Friday expiration) SPX option series. Press releases on the VIX
enhancement and the launch of VXTYN futures may be found at the back
of the room.
I am grateful for the opportunity to share these new developments with
you today. 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.
As an example, CBOE originally offered Weeklys expiring on a near-term
Friday and Quarterlys expiring at end of every quarter until we received
two very specific requests from RMC participants….. Could CBOE offer
SPX Weeklys with more expirations out at least 5 weeks? And, while we
were at it, could we offer end-of-month SPX options?
I am pleased to say we were able to act upon both requests, with good
results for our customers and our markets.
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CBOE continues to create new listings for non-standard options
expirations. First Weeklys, then Quarterlys and, most recently,
End-Of-Month options. Clients continue to tell us that having more
listed expiration dates to choose from enabled them to more precisely
meet their needs.
I hope this inspires you to share your thoughts, suggestions or questions
with me -- or anyone from the CBOE team -- throughout the conference.
Also joining us are representatives from our valued index-provider
partners, Standard and Poor’s and Russell Indexes, who are also looking
forward to meeting you. The ability to connect with you one-on-one,
formally or informally, is one of the benefits to a conference like this one.
We look forward to getting to know you better in this wonderful setting.
Thank you again for joining us.
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