GFI Group has launched a new service that provides risk managers with access to independent data for the FX options market. The company will set implied volatility surfaces for OTC FX options in 20 currency pairs at 10:00 am (EST) each day, providing risk managers with data to revalue FX derivative portfolios. The company says that the data will reflect actual traded interbank prices that are live with GFI, supplemented by quotes from the company’s brokers. The prices will be released at 11:00 am (EST).
“The market is in need of a transparent, independent, comprehensive and reliable service that delivers the FX volatility parameters necessary to revalue individual and aggregated FX options,” says Tim Leitch, global head of FX options at JP Morgan.
The revaluation fixings can be downloaded directly into institutions’ risk management systems or into the company’s Fenics FX software. For six tenors between one week and 12 months, GFI will provide not only at-the-money forward 25 delta points, but also generate 10 delta points to achieve a high degree of accuracy. The service is available on Moneyline Telerate market data screens, pages 3760-65 and 3771-75. A subset is also available daily in the Financial Times.
“Current and future regulations require institutions to precisely and independently revalue their derivative contracts so that changes in their market value can be recorded,” says Mike Binns, FX market specialist at GFI. “To date, there have been no means to do this for FX options. Whilst capturing the correct spot, forward and deposit rates necessary for revaluing FX positions has been straightforward for some time, obtaining the correct implied volatility parameters for FX options remains a problem.”
The first collection point for the data, according to Michel Everaert, global head of product marketing at GFI, will be prices from the company’s option trading screen. The second point of collection will be from GFI’s Vol Capture system. “We combine the two which enables us to build a complete picture for the market,” he says.
“Our target for this service incorporates anyone who is active in the options market,” Everaert adds. “It is not only about traders, but also risk managers – on the sell and importantly the buy side. A corporate treasury risk manager would typically have to call three banks to collate revaluation prices, by providing them with this service we are creating a huge efficiency gain.”
The currency pairs are: Aud/Usd, Eur/Chf, Eur/Gbp, Eur/Jpy, Eur/Nok, Eur/Sek, Eur/Usd, Gbp/Usd, Usd/Cad, Usd/Jpy, Usd/Chf, Usd/Pln, Eur/Pln, Eur/Huf, Eur/Ils, Eur/Czk, Usd/Brl, Usd/Ils, Usd/Mxn, Usd/Zar.