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Competition Comes to the Volatility Index Market

Miax Options has unveiled plans to launch volatility trading on the Spikes Index, thus, it says, “marking the end of exclusivity in the volatility market.

The firm will list and trade cash-settled options on Spikes, a measure of the expected 30- day volatility in the SPDR S&P 500 ETF (SPY), the most actively-traded exchange traded fund in the world. Spikes was created by T3 Index, a research-driven financial indexing firm, as part of a partnership with Miax Options’ parent holding company, Miami International Holdings.

“For the first time in its history, the volatility trading market will be open to the full supply and demand pressures of the entire US market,” says Thomas Gallagher, chairman and CEO of Miax Options. “But reaching this milestone is just the beginning of a long line of advancements we have planned for Spikes and Miax Options. We are excited to see this process unfold as a new entrant in the market and to position Spikes to meet its full potential as a robust economic engine over time.”

Built on SPY option bid-ask spreads, the firm says Spikes Index offers “radically faster dissemination”, publishing every 100 milliseconds as opposed to every 15 seconds. Its proprietary ‘price dragging’ technique minimises price distortions for traders in volatile and illiquid markets by insulating the index from erratic movements in the bid-ask spread of constituent options, the firm claims.

“Traders now have a choice, with an alternative that offers competitive pricing and a lower cost of execution. Our fees make volatility trading accessible to a much wider swath of investors, and allow them to trade more frequently,” says Shelly Brown, executive vice president, strategic planning and business development at Miax.“The Spikes settlement auction is highly transparent and accessible. Across all US options exchanges, participants can contribute prices and arbitrage mispriced components, resulting in a more robust index settlement value—all designed to drive transparency and confidence.”

Colin Lambert

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