Cboe Announces Planned Launch of New Cboe S&P 500 Variance Futures

• Newly redesigned product aims to bring OTC variance swaps trading to the exchange-listed market
• Simplifies trading and settlement, while offering benefits of price discovery, central clearing and liquidity
• Product addresses customer feedback and improves upon Cboe's previous variance futures offerings

CHICAGO, July 22, 2024 /PRNewswire/ -- Cboe Global Markets, Inc. (Cboe: CBOE), the world's leading derivatives and securities exchange network, today announced plans to launch a newly redesigned Cboe S&P 500 Variance Futures contract (Ticker: VA), which is expected to begin trading on September 23, 2024, subject to regulatory review.

The Cboe S&P 500 Variance Futures contracts will settle based on a calculation¹ of the annualized realized variance of the S&P 500 Index. The realized variance will be calculated once each day from a series of values of the S&P 500 Index beginning with the closing index value on the first day a VA futures contract is listed for trading and ending with the special opening quotation (SOQ) of the S&P 500 Index on the final settlement date of that contract.

Cboe's new VA futures aim to introduce a simplified approach to variance trading and settlement, providing an exchange-listed alternative to over-the-counter (OTC) variance swaps. Market participants may use these futures in connection with calculating forward implied volatility, managing and hedging against volatility risks, or expressing directional views. Trading within a regulated and transparent on-exchange environment, VA futures are designed to also provide market participants with the additional benefits of price discovery, central clearing and an easily accessible structure.

Cboe introduced its first S&P 500 variance futures product in 2004, followed by several iterations in the following years. The latest product improves upon Cboe's previous offerings and aims to address feedback from a broad spectrum of market participants. As such, the redesigned futures leverage a more straightforward methodology and will quote and trade directly in variance units with a contract size of $1², allowing for easier calculations and position management. Furthermore, the new VA futures correspond to and expire on the same dates as standard S&P 500 Index (SPX) options, which settle on the third Friday of the month. This alignment is expected to offer investors enhanced flexibility in managing variance exposure and implementing more precise hedging and trading strategies.

"Our relaunch of Cboe S&P 500 Variance Futures is another example of Cboe continually refining its offerings to meet customer demand," said Rob Hocking, Head of Product Innovation at Cboe. "Following our previous variance products, we have engaged in close dialogue with our clients to gather insights that have been instrumental in shaping this new iteration. We believe this new version will be more accessible, capital-efficient and user-friendly, providing a way to more easily replicate OTC variance swap exposures without the operational complexities. Additionally, the final phases of the Uncleared Margin Rules have increased the costs of holding OTC derivatives for some market participants. Given the broader regulatory landscape, we believe the current environment is ideal for this relaunch." 

"The new iteration of the Cboe S&P 500 Variance Futures contract reinforces the S&P 500's ongoing strength as the best single gauge of the U.S. equity market and its highly liquid ecosystem," said Tim Brennan, Head of Capital Markets at S&P Dow Jones Indices. "By collaborating with Cboe, market participants will have another tool to further understand opportunities for managing variance as well as risks within the world's most liquid equity benchmark."

The new VA futures will be exclusively listed and traded on Cboe Futures Exchange, LLC (CFE), joining other prominent volatility futures, such as Cboe Volatility Index (VIX) futures and the planned launch of Weekly Options on Cboe Volatility Index Futures and Cboe S&P 500 Dispersion Index (DSPX) futures, subject to regulatory review.

Cboe will be hosting a webinar on the key benefits and opportunities provided by the new Cboe S&P 500 Variance Futures on Tuesday, July 23 at 8:30am ET. To register for the webinar, please click here. For more information about Cboe S&P 500 Variance Futures, please visit: Cboe S&P Variance Futures.  

About Cboe Global Markets

Cboe Global Markets (Cboe: CBOE), the world's leading derivatives and securities exchange network, delivers cutting-edge trading, clearing and investment solutions to people around the world. Cboe provides trading solutions and products in multiple asset classes, including equities, derivatives, FX, and digital assets, across North America, Europe and Asia Pacific. Above all, we are committed to building a trusted, inclusive global marketplace that enables people to pursue a sustainable financial future. To learn more about the Exchange for the World Stage, visit www.cboe.com.

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Cboe^®, CFE^®, Cboe Futures Exchange^®, VIX^®, and Cboe Global Markets® are registered trademarks of Cboe Exchange, Inc. All other trademarks and service marks are the property of their respective owners. The S&P 500 Index is a product of S&P Dow Jones Indices LLC ("S&P DJI"), and the S&P 500 Index has been licensed to Cboe Exchange, Inc. for the purposes of creating the Cboe S&P 500 Variance Indicator.  "Variance Indicator" means a series over time of realized or implied variance values, which series uses as input for its calculation, among other values, one or more of the following values: the value of one or more Standardized Options Contracts based on an Underlying S&P Index, the value of another financial interest based on an Underlying S&P Index, or the value of an Underlying S&P Index. S&P^®, S&P 500^®, SPX^®, DSPX^®, DSPBX, US 500 and The 500 are trademarks of S&P DJI or its affiliates, and have been licensed by Cboe Exchange, Inc. for certain purposes.  Cboe S&P 500 Variance Futures settling into the Cboe S&P 500 Variance Indicator are not issued, marketed, sponsored or promoted by S&P Dow Jones Indices or its affiliates, and S&P DJI will have no liability with respect thereto.

Trading in futures and options on futures is not suitable for all market participants and involves the risk of loss, which can be substantial and can exceed the amount of money deposited for a futures or options on futures position. You should, therefore, carefully consider whether trading in futures and options on futures is suitable for you in light of your circumstances and financial resources. You should put at risk only funds that you can afford to lose without affecting your lifestyle. For additional information regarding the risks associated with trading futures and options on futures and with trading security futures, see respectively the Risk Disclosure Statement Referenced in CFTC Letter 16-82 and the Risk Disclosure Statement for Security Futures Contracts. Certain risks associated with options, futures, and options on futures and certain disclosures relating to information provided regarding these products are also highlighted at https://www.cboe.com/us.

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Nothing in this announcement should be considered a solicitation to buy or an offer to sell any securities or futures in any jurisdiction where the offer or solicitation would be unlawful under the laws of such jurisdiction. Nothing contained in this communication constitutes tax, legal or investment advice.  Investors must consult their tax adviser or legal counsel for advice and information concerning their particular situation.

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Some factors that could cause actual results to differ include: the loss of our right to exclusively list and trade certain index options and futures products; economic, political and market conditions; compliance with legal and regulatory obligations; price competition and consolidation in our industry; decreases in trading or clearing volumes, market data fees or a shift in the mix of products traded on our exchanges; legislative or regulatory changes or changes in tax regimes; our ability to protect our systems and communication networks from security vulnerabilities and breaches; our ability to attract and retain skilled management and other personnel; increasing competition by foreign and domestic entities; our dependence on and exposure to risk from third parties; global expansion of operations; factors that impact the quality and integrity of our and other applicable indices; our ability to manage our growth and strategic acquisitions or alliances effectively;  our ability to operate our business without violating the intellectual property rights of others and the costs associated with protecting our intellectual property rights; our ability to minimize the risks, including our credit, counterparty, investment, and default risks, associated with operating a European clearinghouse; our ability to accommodate trading and clearing volume and transaction traffic, including significant increases, without failure or degradation of performance of our systems; misconduct by those who use our markets or our products or for whom we clear transactions; challenges to our use of open source software code; our ability to meet our compliance obligations, including managing potential conflicts between our regulatory responsibilities and our for-profit status; our ability to maintain BIDS Trading as an independently managed and operated trading venue, separate from and not integrated with our registered national securities exchanges; damage to our reputation; the ability of our compliance and risk management methods to effectively monitor and manage our risks; restrictions imposed by our debt obligations and our ability to make payments on or refinance our debt obligations; our ability to maintain an investment grade credit rating; impairment of our goodwill, long-lived assets, investments or intangible assets; the impacts of pandemics; the accuracy of our estimates and expectations; litigation risks and other liabilities; and risks relating to digital assets, including winding down the Cboe Digital spot crypto market, operating a digital assets futures clearinghouse, cybercrime, changes in digital asset regulation, and fluctuations in digital asset prices. More detailed information about factors that may affect our actual results to differ may be found in our filings with the SEC, including in our Annual Report on Form 10-K for the year ended December 31, 2023 and other filings made from time to time with the SEC.

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¹ For more information on the calculation of the final settlement value, please refer to the Product Specifications for Cboe S&P 500 Variance Futures on Cboe's website here.
² Multiplied by the futures price

SOURCE Cboe Global Markets, Inc.