Volatility Index for 10-Year Treasury Options Begun by CBOE, CME

The Chicago Board Options Exchange and the CME Group Inc. started an index that measures the pace of projected swings in U.S. 10-year Treasury futures.

The volatility index, based on options on the CME Group’s 10-year Treasury note futures, will be calculated and disseminated by the CBOE to gauge the expected level of swings in long-term Treasuries as signaled by the options market. More than 56 million options contracts on 10-year Treasury note futures traded last year on CME, the world’s largest futures exchange, according to a note published today.

As well as being CME’s most active interest-rate options, “interest-rate derivatives also represent the largest asset class in the over-the-counter market,” Richard Dufour, an executive vice president at the CBOE, wrote in the note. “We believe this CBOE/CBOT Volatility Index will serve as a strong benchmark to help our global customers manage their exposure to market volatility.”

CBOT, as the Chicago Board of Trade is known, is a CME Group exchange on which Treasury futures and options are traded.

The CBOE in coordination with the CBF, a futures exchange also among firms held by CBOE Holdings Inc. (CBOE), plans to eventually offer trading on the new volatility index.

To contact the reporter on this story: Liz Capo McCormick in New York at emccormick7@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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