CBOE Futures Exchange, LLC (CFE) plans to launch trading in S&P 500 Variance futures on Monday, 10 December. The S&P 500 Variance futures contract, like over-the-counter (OTC) variance swaps, allows users to trade the difference between the implied and realized variance of the S&P 500 Index.
CFE's variance futures contract will offer the same quoting conventions and economic performance of OTC variance swaps and will provide the advantages of exchange-traded contracts -- transparency, price discovery and counterparty clearing guarantees.
The new S&P 500 Variance futures contract is designed to offer benefits to both existing OTC users and to customers who have not traditionally participated in the OTC variance swap market.
"The S&P 500 Variance futures contract is our latest effort to attract over-the-counter participants to our marketplace by customising our proprietary products and services to fit their needs," says CBOE Holdings President and COO Edward T Tilly (pictured). "We're seeing OTC market participants increasingly look to exchange-traded products to mitigate risk, and S&P 500 Variance futures will be an appealing addition to our line of OTC-like products."
CFE will also begin a Lead Market Maker Program (LMM) for S&P 500 Variance futures, and an affiliate of DRW Trading Group has been approved as an LMM. DRW Trading Group is a principal trading organisation that trades across a wide range of asset classes for its own account.