New service provides a reliable reference for FX Volatility
Tradition-ICAP, the world’s leading voice broker and electronic platform for the trading of interdealer currency options, today announced the launch of its new daily Volatility Fixing service Vol-Fix. This service provides an independent and reliable market data reference point to help create a fully tradable asset class for trading volatility for the first time.
By establishing a dependable and tradable fix, the market will have an increased ability to create new products and services, such as cash settled forward volatility agreements, volatility trading funds, volatility indexes and hybrid instruments. Starting with the most liquid tenors in EURUSD, the service will then be extended to cover other highly liquid currency pairs, including USDJPY, EURJPY, GBPUSD, EURCHF, USDCAD, AUDUSD, as well as the most liquid emerging market pairs.
Tradition-ICAP is the leading interdealer broker for currency options and clients will benefit from voice brokered liquidity and the market-leading FX options electronic broking platform, Volbroker.
The fixing rate itself will be published every day at 4pm London time, consistent with the WM/Reuters spot fix. Prices and deals between 3.50pm and 4pm on the Volbroker platform will be used to calculate the exact rate. The fix will be published on Bloomberg (VFIX), Reuters (VFIX), the Tradition-ICAP websites www.tradition-icap.com and www.volfixing.com.
Terry Benson, Global head of Business Development, Tradition-ICAP, said: “Vol-Fix has been designed with input from the market in order to meet its requirements on an ongoing basis. It will help establish a much greater level of certainty and assurance when it comes to volatility trading, which we believe will play a key role in the creation of new products. Vol-Fix sits very much in line with our overall approach to enhance efficiencies and transparency within the market, whilst also providing clients with the flexibility they require to develop new trading strategies and solutions.”
Kevin Rodgers, Global head FX Spot, e-trading and Derivatives at Deutsche Bank, added: “A reliable and independent volatility fix based on real market rates and actual deals will be a valuable addition to the volatility markets. In time, I believe it will allow the market to develop some innovative products, which will allow companies and funds to hedge and take risk in new ways.”
Isaac Lieberman, managing director, e-FX Options at JP Morgan, commented: “The Tradition-ICAP Volatility Fix is a welcome addition to the suite of products available to the FX Options community. The Fix also creates some interesting opportunities for the development of new volatility based derivatives. As the Fix is derived from price and trade data from the Tradition-ICAP Volbroker FXO platform, the market can be confident that it will be accurate and reliable.”
