CBOE Reports Record Trading Volume, New FX Volatility Indexes

CBOE Holdings Inc. (CBOE) saw new all-time highs in total volume and average daily volume in 2014. Increases were seen in average daily volume across each product category.

Total 2014 volume jumped 11 percent to 1.3 billion contracts, more than double the industry average of a four percent gain. Average daily volume was 5.3 million contracts, an increase of 12% from 2013.

VIX options average daily volume climbed to a new record for the fifth year in a row in 2014. VIX options average daily volume stood at 632,000 last year. Average daily volume in VIX futures stood at 200,521. Notably, the use of SPX Weeklys continues to grow, with average daily volume at 272,277.

Edward Tilly, chief executive officer of CBOE Holdings is upbeat on the volume outlook for 2015. "I like the trajectory. We are not done. We are outpacing last year," he told a group of Chicago-based reporters on January 14 at a media briefing.

CBOE stock continues to climb, hitting a new all-time high at $68 on January 8, which is up from the July low at around $47. For the fourth consecutive year since their IPO, CBOE increased their quarterly dividend in 2014 to $0.21 per share, an increase of 17%. Overall, CBOE's total shareholder return was 25% for 2014, compared with an average of 13% for their exchange peers.

New this month, CBOE announced that it began disseminating values for three new volatility indexes that CBOE calculates using the prices of CME Dollar/Euro, Dollar/British Pound and Dollar/Japanese Yen futures options.

The CBOE/CME FX Euro Volatility IndexSM ( EUVIX), the CBOE/CME FX British Pound Volatility IndexSM (BPVIX) and the CBOE/CME FX Yen Volatility IndexSM (JYVIX) are the first benchmarks to track the volatility of foreign exchange (FX) futures options.

Looking ahead, increased equity market volatility could help spur even higher trading volumes. In 2014, equity market volatility levels were relatively quiet. But, January has seen the VIX push back above the 20% level. Often called the market's "fear gauge" — readings in the 25-30 level are historically higher levels. The higher VIX readings tend to correspond to higher levels of fear or uncertainty in the marketplace.

A TABB Group study on the institutional use of U.S. equity index derivatives found that over 90% of asset managers say their equity index derivatives volume will increase over the next year.

Buckle up, increased levels of volatility to start the year could mean a bumpy ride in the equity markets in 2015.

Kira Brecht

Posted by Kira Brecht

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