Cboe has plans to list Cboe iBoxx Emerging Market Bond Index futures for trading on Cboe Futures Exchange next month.
Beginning on June 17, the IEMD futures will be based on the S&P Dow Jones Indices’ iBoxx USD Liquid Emerging Market Sovereigns & Sub-Sovereigns Index (ticker: IBXXEMLQ).
IEMD futures for bonds issued by emerging markets
IEMD futures offer exposure to U.S. dollar-denominated bonds issued by governments or sub-sovereign issuers from emerging market countries.
For current and potential emerging market debt investors, IEMD futures could be used to hedge existing exposures, implement relative value strategies against other fixed-income instruments, and manage interest rate and credit risk. IEMD futures will be exchange-traded and centrally cleared, which will help provide operational simplicity and limit counterparty risk compared to over-the-counter instruments.
IEMD futures will be cash-settled and available to trade at nearly 24-hours per weekday, allowing investors across the globe to manage risk more efficiently. CFE plans to list for trading up to four near-term serial contract months and four contract months on the March quarterly cycle for IEMD futures.
As of April 30, 2024, the iBoxx USD Liquid Emerging Market Sovereigns & Sub-Sovereigns Index had 535 constituents across 46 emerging market countries, including Mexico, Argentina, and the United Arab Emirates, and an estimated aggregate amount outstanding of $1.03 trillion.
The index methodology is designed to include bonds with at least $1 billion amount outstanding at rebalancing and does not include any country that is in default on its external debt or subject to financial sanctions by the United States or European Union.
“New ways to manage risk across asset classes”
Rob Hocking, Senior Vice President and Head of Product Innovation at Cboe Global Markets, said: “We are excited to build upon Cboe’s ongoing collaboration with S&P Dow Jones Indices and expand Cboe’s credit market offerings to include emerging market futures. Cboe changed the way investors traded volatility 20 years ago with the launch of VIX futures, and today we continue to innovate and strategically offer new ways to manage risk across asset classes. Whether investors or fund managers are looking to hedge current positions or gain broad exposure to the market for bonds issued by governments or sub-sovereign issuers from emerging market countries, IEMD futures are designed to provide that exposure in a U.S. regulated and capital efficient manner.”
Frans Scheepers, Global Head of Fixed Income, Currency and Commodities Products at S&P Dow Jones Indices, commented: “S&P Dow Jones Indices’ iBoxx USD Emerging Markets Broad Index Series was launched in January 2024 to offer global investors an independent market performance gauge to support their renewed and growing interest in shorter duration, higher yielding fixed income exposures to developing markets for risk management and diversification purposes. S&P DJI is pleased to license the iBoxx USD Liquid Emerging Market Sovereigns & Sub-Sovereigns Index, which was launched in March 2024, and is designed specifically for use with tradable products to Cboe, further strengthening the liquid ecosystem of financial products that are tracking our innovative and pioneering fixed income benchmarks.”
In addition to IEMD futures, CFE currently offers investors exposure to high yield and investment grade U.S. corporate debt through its Cboe iBoxx iShares Bond Index futures and options on futures offering.
