Cboe to expand corporate bond index product suite
“We believe IBHY and IBIG options on futures will allow a wider array of futures market participants to use these products, including those unable to access securities-based options products, while extending trading to global hours for IBHY and IBIG futures will help investors in the U.S. and abroad more efficiently manage positions around the clock.”
Cboe Global Markets has plans to expand its corporate bond index product suite with two new offerings to be listed for trading on Cboe Futures Exchange, LLC (CFE) beginning July 10.
The exchange operator also plans to extend trading hours for IBHY and IBIG futures to nearly 24-hours per weekday in the third quarter of 2023.
Cboe to launch options on IBHY and IBIG futures
Options on IBHY futures (options ticker: IBYO) will be options on the underlying IBHY futures. The price of IBHY futures is based on the iBoxx® iShares® $ High Yield Corporate Bond Index (IBXXIBHY Index), which is designed to measure the performance of U.S. dollar-denominated high yield corporate debt.
Options on IBIG futures (options ticker: IBGO) will be options on the underlying IBIG futures. The price of IBIG futures is based on the iBoxx® iShares® $ Investment Grade Corporate Bond Index (IBXXIBIG Index), which is designed to measure the performance of U.S. dollar-denominated investment grade corporate debt.
CFE’s futures and options on futures products can offer broad coverage of the U.S. corporate bond universe and allow users to hedge and mitigate corporate bond credit risk, and more generally allow them to efficiently allocate to the corporate bond market and implement fixed-income trading strategies.
The new IBYO and IBGO options will have American-style exercise, will be physically-settled, will have P.M. settlement and will trade electronically on CFE during regular trading hours, from 9:30 a.m. to 4:00 p.m. ET.
Initially, CFE may list for trading options on futures on up to four near-term serial months and four months on the March quarterly cycle for each product. The options on futures will expire on the same day as the underlying futures contract. The contracts will be cleared through OCC and be regulated by the Commodity Futures Trading Commission (CFTC).
The extended trading to global hours is planned for IBHY and IBIG futures only and will cover a 23-hour time period per weekday running Monday through Friday. The extended trading hours session begins the prior day at 6:00 p.m. ET and runs until 9:30 a.m. ET of the current day (trading for the Monday trading day would begin Sunday evening). Regular trading hours run from 9:30 a.m. ET to 4:00 p.m. ET of the current day and are then followed by an extended trading hours session from 4:00 p.m. ET to 5:00 p.m. ET of the current day.
Expanded risk management tools to effectively manage credit portfolios
Arianne Adams, Senior Vice President, Head of Derivatives and Global Client Services at Cboe Global Markets., said: “We launched IBHY and IBIG futures in 2018 and are pleased to continue our collaboration with BlackRock and IHS Markit, now part of S&P Global, to further grow our corporate bond index offering. These new products and enhanced functionality will provide investors with expanded risk management tools that can help them more effectively manage their credit portfolios. Additionally, the new contracts and expanded trading hours are expected to also enable us to reach and better serve a broader universe of customers. We believe IBHY and IBIG options on futures will allow a wider array of futures market participants to use these products, including those unable to access securities-based options products, while extending trading to global hours for IBHY and IBIG futures will help investors in the U.S. and abroad more efficiently manage positions around the clock.”
Tim Brennan, Managing Director and Head of Capital Markets at S&P Dow Jones Indices, commented: “The iBoxx iShares $ Corporate Bond Indices are the latest addition to the benchmarks that comprise the liquid S&P Dow Jones Indices fixed income tradable ecosystem. S&P DJI is pleased with its ongoing collaboration with Cboe and the licensing of its iBoxx high yield and investment grade bond indices as the underlying benchmarks for the exchange’s latest product launch. With its expanded fixed income indexing capabilities through the S&P Global and IHS Markit merger, S&P DJI is able to provide a full suite of index tools to help clients better measure risks and opportunities in the credit markets. This launch also further strengthens the liquid ecosystem of financial products that are already tracking both S&P DJI’s family of equity and fixed income market benchmarks.”