Cboe Signs Licensing Agreement with Validus to Drive Index Innovation

Fazzaco learned that Cboe Global Markets, which operates a major derivatives exchange in the US, announced on Wednesday that a licensing agreement has been signed between the company and Validus Macro Strategies, a provider of rule-based options-based solutions for institutional investors, creating the framework for their cooperation to develop new indices and solutions. 

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Cboe will gain exclusive rights to use Validus' proprietary methodologies for the development and offering of derivatives-based indices and related investable financial products, according to the agreement.

The press release noted that Cobe will conduct new measures following the agreement. Initially, the company will launch a new series of Cboe Validus Dynamic Indices, which aims to show the performance of active BuyWrite and PutWrite strategies on major U.S equity indices over the next few months. Besides, Cboe plans to launch other active indices for unique index-based products in collaboration with Validus in the future.

Different from traditional options-based strategies, Validus' proprietary methodologies are active and rule-based at the same time. Features like options expiries, strikes or roll dates are dynamically selected. 

Unlike many benchmark indexes, the coming new Cboe Validus Dynamic Indices were created with the intention of being used as investable strategies by a variety of investors. These new indexes will complement the company's current suite of Strategy Performance Benchmark indices, so as to support investors with an effective way to increase risk-adjusted returns within their investment portfolio by adopting options strategies. 

With the new partnership, Cboe witnesses further growth in its global index business. As shown in the company's previous development, it has set good 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.

In may, Cboe Global Markets saw good financial results with the index options trading volume reaching a new high​. To further promote trading of index options, the company has opened a new trading floor in Chicago​, the place where Cboe and the U.S. listed options market began.