CBOE to Develop New Index Options Products Based on FTSE and Russell Indices

Posted: February 26, 2015 | by: Thomas F. McKeon, CFA

CBOE Holdings, Inc. (NASDAQ: CBOE) announced today that it has entered into a licensing agreement with London Stock Exchange Group (LSEG), to develop and list options based on more than two dozen FTSE and Russell indices.

We at Clothier Springs Capital Management believe that the prudent, structural and strategic use of options to hedge traditional equity exposures can enhance returns, buffer risk, augment income and generally deliver superior portfolio return and risk characteristics. We live in an asset allocation world and increasingly that is a global allocation world. As such, it makes sense for options to be available on every significant equity exposure that institutional investors allocate to. With this announcement, the CBOE takes a large step towards making that a reality.

 

From the CBOE Press Release:

Under the agreement, cash-settled options on these indices will now be available to trade in the United States on the Chicago Board Options Exchange (CBOE). In addition, as part of the agreement, CBOE and LSEG will collaborate on new index options products and investor education globally. The trading in FTSE and Russell index-based options on the CBOE will begin in the coming months. 

 

 

LSEG's leading global index franchises, FTSE and Russell indices, represent a diverse group of domestic and global equities with international appeal: the Russell indices include widely followed benchmarks of U.S.-based stocks while the FTSE indices focus primarily on global and emerging equity benchmarks that are widely used in U.S. market.

 

The deal includes the bellwether FTSE and Russell indices: the FTSE GEIS (Global Equity Index Series), which covers 98 percent of the world's investable market capitalization; FTSE EPRA/NAREIT; FTSE China 50; the Russell 2000® Index, which measures performance of the small-cap segment of the U.S. equity market; the  Russell 1000® Index, which comprises a broad large-cap equity segment; the Russell 1000® Value Index, which measures the large-cap equities with lower price-to-book ratios and expected growth values; and the Russell 1000® Growth Index, which measures large-cap stocks with higher price-to-book ratios and anticipated growth.

 

The partnership with CBOE not only seeks to extend the range of these indices but to introduce new options for U.S. investors. CBOE intends to launch a significant new co-branded product every year for the full duration of the agreement, including the opportunity to list cash-settled index options. CBOE intends to develop options based on other FTSE and Russell index products globally as well. Both firms will also combine their significant global resources toward investor education on index-based options.

 

For additional information on CBOE's new FTSE and Russell index options, go to www.cboe.com/FTSERussell.

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