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, an1993, 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.