We devote considerable resources to product research and development. The Company’s broad roster of offerings and the long list of industry-defining products serve as testament to this commitment to innovation.
Among the new products we introduced to the marketplace in 2010 were S&P 500 Dividend Index options. The first contract of its kind in the U.S., and exclusive to CBOE, S&P 500 Dividend Index options, in quarterly (DVS) and annual timeframes (DIVD), allow investors the opportunity to take a broad position on the direction of dividend payments of U.S. stocks, trading the difference between the expected dividends during an accrual period and the actual dividends over that same period.
Weeklys options, which we first introduced in 2005, experienced a significant surge in interest in 2010 as we expanded the number of available contracts and boosted investor education efforts. New Weeklys contracts are listed on Thursday, expire the following Friday, and their shorter time frame allows investors to target investing opportunities around company news or earnings, as well as government reports or announcements.
Anticipating that regulatory reform will prompt the migration of some Over-The-Counter (OTC) trading onto exchanges, we took steps to retool our FLEX options—a customizable options product—to cater to the nearly $2 trillion OTC equity options market. We modified several of the rules for FLEX options to make them trade even more like an OTC product, while still retaining the benefits and safeguards of regulated exchange trading—price discovery in competitive and transparent auction markets with centralized clearing. In addition, we have been working to expand the distribution of our CFLEX platform, an internet based trade execution system that makes FLEX trading even more efficient for institutional users. These efforts have attracted more liquidity into the FLEX market, with the growth in volume reflecting this increased interest. Our total FLEX volume in 2010 grew to 10.9 million contracts, up from the 3.5 million contracts in 2009, an increase of 209 percent. By the end of the year, CBOE commanded 64 percent of all FLEX options trading conducted on U.S. exchanges, up from 32 percent the previous year.
Also appealing to users of the OTC space, in March 2011, we re-introduced
Credit Event Binary Options (CEBOs) contracts. Our Credit Event Binary Options are cash-settled call options that pay a fixed amount when the exchange confirms that a credit event, such as default on specified payment obligations, has occurred to the listed company. If no such credit event occurs, the option expires with no value. We have modified the original version of this product, which was first launched in 2007.
Our research and development in the new product field is highly regarded, and the accolades our Company, its people and products have received illustrate this important work. Over the past decade, we have won more than a dozen awards, the most recent being the “Best Innovation by an Exchange in the Field of Product Design – North America” for our CBOE S&P 500 Implied Correlation Index from Futures and Options World magazine in December.
Through new product engineering or the refinement of existing products, our Company excels at designing the investment tools that will expand the industry’s horizon and create new opportunities for all market participants.
FLEX Options Total Volume
Weeklys Options Total ADV