Derivatives and securities exchange network Cboe Global Markets, Inc. today announced plans to list Cboe iBoxx $ Emerging Market Bond Index futures for trading on Cboe Futures Exchange, LLC (CFE) beginning on June 17, subject to regulatory review.
The IEMD futures will be based on the S&P Dow Jones Indices’ iBoxx USD Liquid Emerging Market Sovereigns & Sub-Sovereigns Index.
IEMD futures are designed to offer investors exposure to U.S. dollar denominated bonds issued by governments or sub-sovereign issuers from emerging market countries. For current and potential emerging market debt investors, IEMD futures could be used to hedge existing exposures, implement relative value strategies against other fixed income instruments and manage interest rate and credit risk. IEMD futures will be exchange-traded and centrally cleared, which will help provide operational simplicity and limit counterparty risk compared to over-the-counter instruments.
As of April 30, 2024, the iBoxx USD Liquid Emerging Market Sovereigns & Sub-Sovereigns Index had 535 constituents across 46 emerging market countries, including Mexico, Argentina and the United Arab Emirates, and an estimated aggregate amount outstanding of $1.03 trillion. The index methodology is designed to include bonds with at least $1 billion amount outstanding at rebalancing, and does not include any country that is in default on its external debt or subject to financial sanctions by the United States or European Union.
“We are excited to build upon Cboe’s ongoing collaboration with S&P Dow Jones Indices and expand Cboe’s credit market offerings to include emerging market futures,” said Rob Hocking, Senior Vice President and Head of Product Innovation at Cboe Global Markets. “Cboe changed the way investors traded volatility 20 years ago with the launch of VIX futures, and today we continue to innovate and strategically offer new ways to manage risk across asset classes. Whether investors or fund managers are looking to hedge current positions or gain broad exposure to the market for bonds issued by governments or sub-sovereign issuers from emerging market countries, IEMD futures are designed to provide that exposure in a U.S. regulated and capital efficient manner.”
IEMD futures will be cash-settled and available to trade at nearly 24-hours per weekday, allowing investors across the globe to manage risk more efficiently. CFE plans to list for trading up to four near-term serial contract months and four contract months on the March quarterly cycle for IEMD futures.
In addition to IEMD futures, CFE currently offers investors exposure to high yield and investment grade U.S. corporate debt through its Cboe iBoxx iShares Bond Index futures and options on futures offering. The products are designed to allow users to hedge and mitigate corporate bond credit risk with exchange traded, centrally cleared products.
