The Australian Securities Exchange (ASX) has begun trading S&P/ASX 200 VIX futures, a new exchange-traded product that allows users to trade, hedge and arbitrage anticipated volatility in the Australian equity market.
The new S&P/ASX 200 VIX futures will allow market participants to trade anticipated changes in volatility in a single transaction and in a manner independent of the factors that normally complicate volatility strategies, such as expiring options and price movements in the underlying market.
The S&P/ASX 200 VIX index (A-VIX), Australia’s equity market volatility benchmark and gauge of the near-term volatility in the Australian equity market over the next 30 days, will be the underlying for the new futures contract. 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 deputy chief executive Peter Hiom says: “ASX is committed to providing new products to meet the changing needs of the market. One of those needs is the ability to trade in volatility as an asset class in its own right. S&P/ASX 200 VIX futures will provide users with the opportunity to more easily and efficiently hedge their investment portfolios against volatility, while also providing new trading opportunities.”
“The launch of S&P/ASX VIX futures is set to change how investors can measure and trade the financial markets in Australia,” says Alex Matturri, chief executive of S&P Dow Jones Indices. “Combining the premier global measure of market volatility, the VIX, with the principal Australian equity benchmark, the S&P/ASX 200, will provide Australian investors with an essential means of managing equity market risk in their portfolio.”
Dedicated market makers will provide liquidity for the futures contract which will be listed alongside the current ASX SPI 200 contract to provide additional trading opportunities.