Bats Global Markets (Bats) and T3Index (T3) today announced the launch of the SPYIX (“the Spikes”), an index measuring expected 30-day volatility in the most actively traded security worldwide, the SPDR S&P 500 ETF (SPY).
Developed in partnership with T3 Index, a respected expert in volatility and options-related indexing, the SPYIX is calculated using prices from highly-active, electronically-traded multiply-listed SPY options, an improvement over the slower, manually-traded, floor-based S&P 500 index options used to calculate other volatility benchmarks. SPYIX also includes important features designed to enhance critical stability during periods of low liquidity in the market, namely its proprietary “price-dragging” technique which helps reduce erratic movements in the index.
The index can be physically replicated with a strip of options, and has been designed to be easily incorporated into the existing ecosystem of volatility-based products including options, futures and ETPs.
The collaboration with T3 on the SPYIX was conceived and is led by Tony Barchetto, Executive Vice President, Head of Corporate Development, for Bats.
Mr. Barchetto said: “In the wake of recent events, the SPYIX is Bats’ response to the market’s demand for a more rigorous and dependable volatility gauge. SPYIX is specifically designed to better capture and reflect today’s largely electronic options market.”
“We are excited about the opportunity to provide the SPYIX to investors of all types and thank T3 Index for partnering with us on a venture consistent with the Bats mission of Making Markets Better,” he added.
Simon Ho, CEO at T3 Index, said, “We are pleased to join with Bats in instituting a transformative index like the SPYIX. As an example, SPY options were actively quoted from the market’s opening seconds on August 24, 2015, and we were able to calculate the SPYIX during a time sensitive period when legacy volatility gauges weren’t available to the many investors who were relying on them. We are looking forward to leveraging our firm’s unique benchmarking strengths to find other ways to serve global markets together.”
SPY is the world’s most actively traded security – with nearly $24bn in daily notional value traded per day in the third quarter of 2015 and options associated with the SPY account for nearly half of the $110bn in notional value traded per day across all US equity options.
The SPYIX is published on the consolidated tape and is accessible on terminals from both Bloomberg and Reuters.