CBOE Will Consider Asian Hub If London Center Succeeds
CBOE Holdings Inc. (CBOE), the biggest operator of U.S. options markets by volume, may consider an Asian hub to tap growing demand in the region after it gauges the success of the one it will start in London next year.
“We are very positive about Asia for business,” CBOE Chief Executive Officer Bill Brodsky said in an interview at the World Federation of Exchanges annual conference in Taipei. “We are starting the London hub in the first half of 2013 and if we’re successful, Asia would be a logical next step.”
The London hub, which will include a data center, will provide European firms with a cheaper means to send and receive data and help them execute trades on the exchange. The Chicago Board Options Exchange Volatility Index, the benchmark gauge for U.S. options known as the VIX (VIX), saw trading surge to a record last month as investors from Asia to Europe and America sought to protect gains in equities.
“To trade Asia, we don’t need to be in Asia,” Brodsky said. “We just need to do Asian hours. The question is ‘do you need an Asian hub so you can be close to the engine?’. It will depend on demand but this could be particularly valuable during non-U.S. trading hours.”
Chicago-based CBOE said in September that it will expand trading hours for VIX futures to 24 hours from eight hours, five days a week, starting in 2013. This is the third time in almost two years that the CBOE Futures Exchange has announced an extension of VIX trading hours. The contracts begin at 8 a.m. New York time, compared with 9:30 a.m. in December 2010. The 1 1/2 hours of early trading represent about 5 percent to 6 percent of CBOE’s daily VIX futures volume.
“The big story for us has been the innovation on the VIX futures,” Brodsky said.
Exchanges in Asia started futures on volatility indexes earlier this year to mimic that success. Hong Kong Exchanges & Clearing Ltd. became the first Asian bourse to offer local volatility index contracts on Feb. 20, and the Osaka Securities Exchange Co. followed a week later with futures on the Nikkei Volatility Index.
Investors in Europe have been able to trade futures on the VStoxx Index, which tracks Euro Stoxx 50 Index (SX5E) swings, since 2009.
U.S. options volume declined 4.2 percent to 1.02 billion contracts in the second quarter versus the same three months in 2011, according to data compiled by Chicago-based OCC, which clears all exchange-traded contracts in the U.S.
“We don’t know when growth will return,” Brodsky said. “It will come back but we don’t know when. My sense is that we are slowly coming out of the malaise. This hasn’t been a normal recession.”
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