The Chicago Board of Options Exchange (CBOE), the largest U.S. options venue, is to become the latest derivatives exchange operator to set up a base in London, while it is also looking to extend the trading times of its popular volatility index.
CBOE is planning to set up a hub in London next year, with its network equipment housed in a London data center—providing European firms with a cost-efficient way to send and receive data and to execute trades on the exchange. While it also aims to offer its Vix Index futures—which measure the implied volatility of S&P 500 index options with the Vix Index often referred to as the ‘fear index‘—on a 24-hour, five days a week basis on its CBOE Holdings exchange, pending regulatory approval.
“Our customers have access to the most comprehensive array of volatility products in the world, and we continually work to create new, more flexible ways for them to trade these products,” William J. Brodsky, chairman and chief executive of CBOE Holdings, told a CBOE risk management conference in Dublin earlier today.
“Around-the-clock hours for Vix Index futures and a London hub offer the ultimate in flexibility.”
CBOE says the 24-hour sessions will accommodate investment banks, proprietary trading firms, hedge funds, commodity trading advisors and issuers of exchange traded products that want to establish or offset VIX Index futures positions, with few time limitations.
This latest move by CBOE firmly ensconces London as the European center for derivatives trading. Last month, CME Group, the largest U.S. futures exchange operator, set out its plans to launch a London-based derivatives venue. Global rivals such as IntercontinentalExchange and Nasdaq OMX have all made London their European derivatives home, while Liffe also operates out of the U.K. capital. Eurex, Europe’s largest derivatives player, is run from Frankfurt.
“Quite honestly, if you were an outsider setting up in the financial markets in Europe it wouldn’t take you more than a few seconds to work out that London is very much the center of things in Europe,” Steve Grob, director of group strategy at Fidessa, a trading and technology company, told Markets Media.
