Day two of Cboe RMC U.S. 2018 kicked off with Ed Tilly, Chairman and Chief Executive Officer of Cboe Global Markets, welcoming approximately 300 attendees to this year’s event, the 34th annual Cboe Risk Management Conference.
Given the recent return of volatility to the marketplace, Tilly focused his remarks on volatility, Cboe’s VIX Index and risk management.
February 5 was an extreme day in the market. The Dow and VIX Index experienced record single-day moves. Exchange traded products positioned for continued low volatility were hit hard and suffered heavy losses. As expected, this received a lot of media attention.
However, many customers are using VIX products to better manage portfolio risk and to smooth out volatility. Tilly said this “doesn’t make news because, in a sense, what was considered extraordinary not so very long ago now has become the ordinary.”
Before Cboe created the VIX Index in 1993, there was no uniform standard for how to think about expected volatility. The VIX Index was a revolutionary concept and, for the first time, “brought to the market a way to measure the market’s expectation of future volatility,” Tilly said.
The launch of VIX futures and options, and their tremendous growth -- in both low and high volatility environments -- have demonstrated their unique utility. This, in turn, has spawned scores of volatility-based ETPs.
The uses and users of VIX derivatives is expanding. Investors all over the world are employing VIX options and futures to buffer the effects of geo-political turmoil, hedge their portfolios against market downturns and many other applications. “We have evolved from a market that not so long ago was the domain of niche professionals to one that provides investors of every stripe with enhanced means for portfolio protection,” Tilly said.
Ongoing education goes hand-in-hand with the growth of VIX derivatives trading. Cboe continually works with market participants, including, “RMC attendees, who have always been at the forefront of volatility trading,” Tilly noted.
Although there have been numerous developments in the volatility space, Tilly concluded by saying “we strongly believe we are still at the edge of innovation when it comes to our VIX product offerings, and we couldn’t be more enthusiastic about the opportunities that lie ahead.”
The full transcript of Ed Tilly’s speech is available here.
Check www.cboe.com for video highlights to be posted later today.