Cboe to develop S&P 500 Dispersion Index to address hedging needs

Rick Steves

The Cboe S&P 500 Dispersion Index will help bring more transparency to the risk and opportunity set in the world’s most liquid equity benchmark.

Cboe Global Markets has announced plans to collaborate with S&P Dow Jones Indices to develop the Cboe S&P 500 Dispersion Index to help market participants better understand portfolio diversification benefits and implement dispersion trading strategies.

The new volatility-related index is designed to provide representation of implied dispersion for the S&P 500 Index. Dispersion is a measure of the spread of constituent returns over a defined period, such as a month. It measures both the opportunity set for individual security selection within a portfolio, as well as the potential diversification achieved by their combination.

The Cboe S&P 500 Dispersion Index will be the first concept developed by Cboe Labs, a newly-formed subsidiary focusing on new tradable products and services.

A standardized index to help traders hedge

John Hiatt, Vice President, Cboe Labs, said: “Cboe has been teaching market participants how to better measure, model and trade market moves through the 450-plus volatility and derivatives-based indices we’ve created over our nearly 50-year history. We revolutionized investing with the creation of the VIX® Index, the first index to measure the market’s expectation of future volatility — and today, we continue our legacy of innovation with the Cboe S&P 500 Dispersion Index.”

Tim Edwards, Global Head of Index Investment Strategy at S&P Dow Jones Indices, commented: “Dispersion is recognized as one of the fundamental metrics of market risks. Unlike related measures of volatility, there hasn’t yet been a simple, tradeable, and standardized index that enables market participants to hedge and express their views on dispersion in the U.S. equity markets. We are excited to collaborate with Cboe on the development of the Cboe S&P 500 Dispersion Index, to bring more transparency to the risk and opportunity set in the world’s most liquid equity benchmark.”

Rob Hocking, Senior Vice President and Head of Cboe Labs, added: “Driven by constant input from our customer base, Cboe Labs is a place where we research, test and iterate as rapidly as possible with a singular goal— to create value-add, disruptive, tradable products and services. Cboe Labs builds on our history of producing many ‘firsts’ for the market and the ongoing dialogue we have with industry peers and regulators on the issues impacting the markets.”

Read this next

Metaverse Gaming NFT

DCentral Miami brings together all of Web3, NFT, DeFi, Metaverse

The world’s biggest Web3 meeting entitled DCENTRAL Miami is set to take place November 28-29, featuring a lineup of some of the biggest and most influential names in the blockchain space.

Digital Assets

Crypto ban expands across UK banks as Starling joins ‎crackdown

UK digital bank Starling has banned ‎all customer payments related to cryptocurrencies, another blow for the crypto traders ‎who recently saw a sizable number of banks deciding not to ‎finance the wobbly asset class.‎

Interviews

Markets Direct at FIA EXPO 2022: Traders know what they want from brokers

The FIA Expo 2022, one of the most prestigious events within the global derivatives trading industry, took place in Chicago on 14 & 15 November.

Interviews

FIA Expo 2022: TNS addresses public cloud limitations with hybrid infrastructure

November is the month of the FIA Expo, one of the largest futures and options conferences in the world, bringing together regulators, exchanges, software vendors, and brokers in one place: the Sheraton Grand Chicago Riverwalk. 

Retail FX

Italy’s regulator blacks out Finance CapitalFX, MFCapitalFX

Italy’s Commissione Nazionale per le Società e la Borsa (CONSOB) has shut down new websites in an ongoing clampdown against firms it accuses of illegally promoting investment products in the country.

Retail FX

Suspected leader of Honk Kong ramp-and-dump scam appears in court

A leader of a sophisticated ramp-and-dump scheme made his first court appearance in a Hong Kong court today, charged with market manipulation and various criminal offences. The case stems from an earlier joint operation of Hong Kong’s financial watchdog, the Securities and Futures Commission (SFC), and the local police. 

Institutional FX

Cboe’s James Arrante discusses growing demand for fixed income, FX algo

We caught up with James Arrante, senior director of FX & US treasuries product and business management at Cboe Global Markets, to uncover emerging trends in the FX and fixed income markets and learn more about the bourse operator’s recent initiatives.

Retail FX

Eurotrader acquires UK broker Petra Asset Management

Eurotrader Group has formally entered into the UK market with the acquisition of FCA-regulated broker, previously named Petra Asset Management Ltd. The new entity operates under the brand name Eurotrade Capital Ltd.

Inside View, Retail FX

The Game of Chess Continues – OPEC, China and the Oil Market

Over the past decade, the US has been complaining about the amount of power which the BRIC group, and specifically China, has on the global economy. BRIC stands for Brazil, Russia, India and China; these were the world’s fastest growing economies. Only in the past 10 months, the US has turned their attention toward OPEC due to the prices of fuel. Nevertheless, China seems to have a strong influence even over the price of crude oil.

<