Cboe Futures Exchange to list Options on Futures
Cboe Futures Exchange, LLC (CFE) plans to list Options on Futures effective April 3, 2023, subject to regulatory review.
CFE plans to initially list Options on Cboe Volatility Index (VX) Futures and Options on Cboe Corporate Bond Index Futures. The Options on Corporate Bond Index Futures will include Options on Cboe® iBoxx® iShares® $ High Yield Corporate Bond Index (“IBHY”) Futures and Options on Cboe® iBoxx® iShares® $ Investment Grade Corporate Bond Index (“IBIG”) Futures.
CFE Trading Privilege Holders (TPHs) will be able to trade in Options on Futures with existing or new EFIDs without obtaining any additional CFE approvals. Any trading by a TPH in Options on Futures will be subject to the CFE risk control settings for Options on Futures. Thus, for a TPH to trade in Options on Futures, the TPH’s clearing firm would need to permission the TPH to do so by setting the CFE risk controls to enable trading by the TPH in Options on Futures.
Options on VX, IBHY, and IBIG Futures will have American-style exercise and will be physically settled. Upon the expiration of Options on VX, IBHY, and IBIG Futures, one or more of the underlying futures contracts are delivered. In the case of Options on IBHY and IBIG Futures, the Options on Futures contract and the underlying futures contract will share the same expiration date. As a result, an Options on IBHY or IBIG Futures Contract is settled into the underlying futures contract and the underlying futures contract is then settled into cash.
Options on VX Futures will be mid-curve options. Monthly expiring Options on VX Futures will settle into a VX future that expires at least one month in the future. VX weekly mid-curve options (“WMCO”) expirations will settle into the front month VX future at the time of the WMCO contract expiration. There will be no WMCOs that expire the same week as a monthly VX futures contract.
CFE will make available a number of existing as well as additional CFE risk controls TPHs and clearing firms may utilize for trading in Options on Futures.
The Options on Futures feeds will be available in Cboe’s primary datacenter (Equinix NY5), and will be accessible via physical connectivity to the same environment that is also used for CFE. Recipients will have the ability to subscribe to the Options on Futures TOP and PITCH feeds directly via separate Multicast channels from the current CFE TOP and PITCH feeds. Market participants who have existing L3 physical connectivity to the CFE Exchange will be able to leverage those connections to access the Options on Futures feeds as well, dependent upon available bandwidth.
The Options on Futures PITCH feed will also be made available over new 10 Gbps Layer 1 (“L1”) Physical Ports but will require separate connectivity from existing L1 connections accessing the CFE PITCH feed.