Exchange operator Bats has launched a new index to track volatility in the S&P 500 by measuring fluctuations in the related exchange traded fund.
The product is designed to appeal to those who are concerned about the limitations of CBOE’s Vix measure which was impacted by market turbulence last year.
Bats’ new index, labelled the ‘SPYIX’, measures anticipated 30-day volatility by tracking the price of options linked to State Street Global Advisers’ SPDR S&P 500 Trust exchange traded fund.
In a media statement announcing the launch, Bats’ recently promoted head of corporate development Tony Barchetto said that the new product would be a ‘more rigorous and dependable volatility gauge’.
He added: “SPIYX is specifically designed to better capture and reflect today’s largely electronic options market.” A spokesperson for CBOE were unavailable to respond at the time of publication.
In a statement, Bats explained SPYIX includes features designed to enhance stability during critical periods of low liquidity.
Its proprietary ‘price-dragging’ technique will help lessen erratic movements in the index, according to Bats.
Simon Ho, chief executive officer at T3 Index, said: “SPY options were actively quoted from the market’s opening seconds on August 24 2015, and we were able to calculate the SPYIX during a time sensitive period when legacy volatility gauges weren’t available to many investors who were relying on them.”
SPYIX is available on terminals from both Bloomberg and Reuters. In February, Bats announced a global rebrand and dropped Chi-X from its name.