Cboe Global Markets, Inc has signed a licensing agreement with Validus Macro Strategies, a provider of rule-based options-based solutions for institutional investors, that creates the framework for Cboe and Validus to collaborate on the development of new indices and solutions.
Under this agreement, Cboe will have exclusive rights to develop and offer a range of derivatives-based indices and associated investable financial products using Validus’ proprietary methodologies.
Cboe expects to initially launch a new series of Cboe Validus Dynamic Indices designed to show the performance of active BuyWrite and PutWrite strategies on major U.S equity indices in the coming months. In addition, Cboe may work with Validus to develop other active indices for unique index-based products in the future.
The new relationship furthers Cboe’s growing global index business and builds on Cboe’s proven track record in creating and disseminating some of the industry’s most innovative index offerings, including the Cboe Volatility Index® (VIX® Index), and its suites of Strategy Performance Benchmark indices and Target Outcome indices.
“At Cboe, we seek to innovate to define markets that benefit all participants. Often, this begins with indexing, which has long been a Cboe core competency,” said Catherine Clay, Executive Vice President, Data and Access Solutions at Cboe Global Markets. “Cboe has been a pioneer of strategy performance benchmark indices, which continue to gain traction with investors seeking to use options to hedge risk, reduce volatility and enhance yields. Validus offers a unique, rule-based methodology for constructing options strategies that we believe could further enhance investment outcomes, and we’re excited to leverage their expertise to help develop additional index solutions to meet customer demand.”
“Validus is excited to partner with Cboe Global Markets, a global leader in indices and index products. Combining our risk-centric philosophy and derivatives expertise with Cboe’s focus on product innovation and world class trading infrastructure creates the ideal platform for the development of exciting investment products and risk solutions,” said Kevin Lester, Chief Executive Officer at Validus Risk Management.
Validus’ proprietary methodologies differ from traditional options-based strategies in that they are active and rule-based at the same time. Characteristics such as options expiries, strikes or roll dates are dynamically selected. The new Cboe Validus Dynamic Indices, unlike many benchmark indices, are specifically designed to be used as investable strategies by a wide range of investors. The indices also account for trading impact and consider other operational aspects such as margin rules and the impact of interest rates.
“We are very excited and thankful for the opportunity to work with Cboe to bring innovative solutions based on our hands-on market experience to investors,” said Kambiz Kazemi, Chief Investment Officer at Validus Macro Strategies. “Markets have been undergoing major structural shifts in the last two decades and the effect of these changes are now becoming increasingly apparent to investors. Options-based strategies and indices are increasingly a crucial part of building portfolios and managing their risk. Through this partnership with Cboe, we look forward to bringing practical state-of-the-art solutions to investors and helping them navigate the road ahead.”
The planned launch of the Cboe Validus Dynamic Indices will complement Cboe’s existing suite of Strategy Performance Benchmark indices, which aim to provide investors with an effective way to employ options strategies to improve risk-adjusted returns within their investment portfolio.