ASX Introduces Volatility Futures Trading on S&P/ASX 200 VIX

The operator of Australia’s stock market has started futures trading on the S&P/ASX 200 VIX Index, a volatility gauge designed to help traders hedge against stock-market drops and speculate on swings.

“S&P/ASX 200 VIX futures will allow users to isolate local equity market volatility and avoid the timing, currency and matching risk incurred when using volatility products based on offshore indices,” ASX Ltd. (ASX) said in a statement today.

ASX is expanding into securities based on volatility amid surging demand in the U.S. for exchange-traded notes, futures and options based on expected stocks swings. Trading of futures tied to the U.S. VIX has averaged more than 160,000 per day this year, data compiled by Bloomberg show. That’s the most ever and 69 percent more than the average volume in 2012.

The S&P/ASX 200 VIX uses the methodology from CBOE Holdings Inc. (CBOE)’s Chicago Board Options Exchange Volatility Index, a gauge of 30-day options on the Standard & Poor’s 500 Index. Volume on VIX options soared to a single-day record of 1.78 million on Oct. 8 as American lawmakers struggled to reach an agreement to raise the debt ceiling. On the same day, an exchange-traded note based on short-term VIX futures was the third-most-active security among U.S. stocks and funds with market values exceeding $50 million, data compiled by Bloomberg show.

Chicago-based CBOE, which controls the rights to the VIX, has grown the index through licensing agreements and created volatility measures for Brazilian and Chinese shares. The exchange is in the process of extending the U.S. trading hours for VIX futures to 24 hours, five days a week to lure traders in Europe and Asia who want to use derivatives tied to the S&P 500 to hedge.

Earlier this month, CBOE, the owner of the biggest U.S. options market, introduced a short-term volatility index on the S&P 500 that tracks nine-day options.

To contact the reporters on this story: Nick Baker in Chicago at nbaker7@bloomberg.net; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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