JLN Options: Behold! Fear Squared! CBOE Launches VIX of VIX Index!

Mar 14, 2012

Lead Stories

Behold! Fear Squared! CBOE Launches VIX of VIX Index!
By Kaitlyn Kiernan, Dow Jones Newswires
In the wise words of the nation’s longest-serving president, Franklin D. Roosevelt, “The only thing we have to fear is fear itself.” Today, the Chicago Board Options Exchange has begun tracking just that–the fear of fear. CBOE announced the beginning of its new “VIX of VIX” index (VVIX). The index will track the volatility of CBOE’s Volatility index–the market’s so-called fear gauge.
http://jlne.ws/wox6Lf

CME’s incoming CEO Gill isn’t seen as a change agent
By Lynne Marek, Crain’s Chicago Business
New CME Group Inc. CEO Phupinder Gill, or “Gill” as he’s known in the futures industry, will put a new face on the Chicago exchange at a time when some customers are smarting from the MF Global Inc. debacle. But the CME lifer isn’t likely to set a new course.
CME shares underscored an anticipation of little change Tuesday. As the Dow Jones index jumped 1.7 percent and the Nasdaq rebounded to 2000 levels, the stock advanced just 1 percent to $272.99. At the close of 2007, shares peaked at $686 apiece.
Mr. Gill, 51, who started at CME in 1988 as a clerk in the Canadian dollar pit after being cut at the Chicago Board Options Exchange in the wake of Black Monday, rose through the ranks of the Mercantile Exchange’s clearing house and became CME president in 2007.
http://jlne.ws/z4KJ85

Adios, Stock Correlation!
By Chris Dieterich and Steven Russolillo, The Wall Street Journal
The CBOE’s VIX index got crushed yesterday as stocks rose, a reflection of diminishing expectations for the S&P 500 to dart around during the next month. But stock pickers will point out that correlation, another prime metric for the equity-options market, is similarly getting pummeled.
The CBOE S&P 500 Implied Correlation Index, which measures the expected correlation of S&P’s 50-largest stocks versus the index based on options prices, is hovering around its lowest level since August 2008, according to MKM Partners.
http://jlne.ws/y771ph

Hedge funds launches surged in 2011
By Katya Wachtel, Reuters
The number of new hedge funds surged last year to the highest level since 2007, despite one of the most miserable annual performances in the industry’s history, according to data released on Tuesday.
The number of new hedge funds totaled 1,113 in 2011, according to fund tracker Hedge Fund Research. While that figure did not eclipse the 1,197 launches in 2007, it was the most openings since the financial crisis.
http://jlne.ws/xjbIio

Exchanges

CBOE Introduces “VIX of VIX” Benchmark Index: Provides a Gauge for Measuring Volatility of the VIX Index Itself
Press Release
The Chicago Board Options Exchange (CBOE) announced today that it began publishing values for the CBOE “VIX of VIX” Index (ticker: VVIX(SM)) this morning.
As its name implies, the CBOE’s VIX of VIX Index tracks the volatility of the CBOE Volatility Index (the VIX Index), the world’s most widely-followed market volatility index.
“Volatility traders are intrigued with the ability to formulate new strategies based on the relationship between the VIX Index and the volatility of the VIX Index,” CBOE Chairman and CEO William J. Brodsky said. “The fact that our customers were looking for a way to measure the volatility of the VIX shows just how far the VIX Index has come. We’re thrilled to introduce a product that tracks the volatility of the world’s most- watched volatility index.”
http://jlne.ws/yFjGe0

CFE and CBOE to Launch Futures and Options on Crude Oil ETF Volatility Index
Press Release
CBOE Holdings, Inc. (NASDAQ: CBOE) announced today that Chicago Board Options Exchange (CBOE) and CBOE Futures Exchange (CFE) will each launch a new volatility index product based on the CBOE Crude Oil ETF Volatility Index (OVX) in coming weeks.
CBOE Crude Oil ETF Volatility Index security futures (OV) will begin trading on CFE on Monday, March 26, and options on the OVX Index will begin trading on CBOE on Tuesday, April 10.
OVX Index products, based on listed options prices of the United States Oil Fund, LP (USO) — the ninth most-actively-traded ETF options contract in the U.S. last year — will allow traders to hedge volatility risk associated with crude oil futures prices.
CBOE began disseminating values on the OVX Index in 2008. The OVX Index calculation is derived from applying CBOE’s VIX® methodology to the prices of CBOE-listed options on USO.
http://jlne.ws/A1gMg5

Regulation

CFTC Vacates CME Clearing Europe Limited Registration as a Derivatives Clearing Organization
CFTC
Washington, DC—At the request of CME Clearing Europe Limited (CMECEL), pursuant to Section 7 of the Commodity Exchange Act, the Commodity Futures Trading Commission issued an Order on March 13, 2012, vacating the registration of CMECEL as a derivatives clearing organization.
The Order of Vacation is available on the CFTC’s website (see Related Links).
http://jlne.ws/x1nb4d

Technology

Newedge launches Phase 2 of Smart Order Router platform for US equity options and cash equities products
Opalesque
Newedge Group (“Newedge”), a global leader in multi-asset brokerage and clearing, announced today the launch of Phase 2 of their Smart Order Router (SOR) platform for U.S. equity options and cash equities products.
This new in-house, low-latency routing platform is now open to executing market participants – including small- and mid-sized registered broker dealers, market makers, exchanges and high frequency traders – providing independent, best execution and superior price discovery.
http://jlne.ws/ADMh8x

Strategy

Does A Sub-15 VIX Signal A Turnaround?
By Bill Luby, Business Insider
When the VIX recently slid below 20.00 for an extended period, I sensed a noticeable unease about the state of the market in many traders and investors. Clearly a sub-20 VIX was underestimating the risks in the current and future market environment, they thought. When the VIX dipped below 18.00 that unease intensified and now with the VIX hovering around the 15.00 range and I can sense that quite a few are ready to grab the nearest pitchfork and riot about the inhumanity of the wayward VIX.
http://jlne.ws/yi0sW1

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