Euronext and FTSE Group have announced plans to launch a new volatility index, the FTSE 100 Volatility Index, from 23 June to capture on a real-time basis the implied volatility embedded in prices of FTSE 100 options available on Liffe, NYSE Euronext's derivatives market.
Drawing on expertise from NYSE Euronext and the FTSE Group, the FTSE 100 Volatility Index will be calculated in a transparent manner using prices of out-of-the-money FTSE 100 call and put options. Quoted in terms of percentage points, it will translate on an annualised basis the expected movement in the underlying index over the next 30-day period.
According to NYSE Euronext, market participants consider volatility indices as a kind of a barometer where high values reflect a greater degree of underlying index turbulence, and a low value is consistent with greater stability.
'FTSE Group continues to work closely with our partners to produce new and innovative index products,' says Imogen Dillon-Hatcher, managing director for Europe, the Middle East and Africa. 'With FTSE and NYSE Euronext's combined index expertise and knowledge of investor needs, the FTSE 100 Volatility Index will be used by investors for further analysis of this complex market.'
Jonathan Seymour, director of equity derivatives at Liffe, adds: 'The FTSE 100 Volatility Index will provide an instant view of short-term implied volatility in the FTSE 100 options market. It will provide the market with a guide to sentiment and the trend in what is colloquially known as the 'fear factor'.'
The index is calculated by NYSE Euronext using the VIX methodology, a sentiment indicator for the US market based on the S&P 500 index option prices on the Chicago Board Options Exchange.
FTSE Group, which has offices in London, Frankfurt, Hong Kong, Madrid, Paris, New York, San Francisco and Tokyo, serves clients in 77 countries worldwide, calculating and managing the FTSE Global Equity Index series, which includes benchmarks such as the FTSE All-World Index, the FTSE4Good series and the FTSEurofirst Index series, as well as domestic indices such as the FTSE 100. The firm has collaboration agreements with the Athens, Amex, Cyprus, Euronext, Johannesburg, London, Madrid, Nasdaq and Taiwan exchanges, as well as with Nomura Securities and China's Xinhua Finance.
Liffe is the international derivatives business of Euronext, a subsidiary of NYSE Euronext, offering global futures and options products on its Liffe Connect trading platform. Business in derivatives on equities and interest rates, indices and commodities worth more than EUR2.3trn is traded through Liffe every day, making it the world's second largest derivatives exchange by value of transacted business.