CBOE and S&P Global Launch New Index to Measure S&P 500 Dispersion

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CBOE and S&P Global Launch New Index to Measure S&P 500 Dispersion
Credit: © Reuters.

Cboe Global Markets (BATS:NYSE: CBOE ) and S&P Global (NYSE:SPGI) announced on Monday their collaboration to launch a first-of-its-kind index, the Cboe S&P 500 Dispersion Index (DSPX), set to go live on Wednesday, September 27, 2023. The DSPX is designed to provide deeper insights into U.S. equity market volatility by measuring the expected dispersion in the S&P 500 Index over the next 30 calendar days.

The new index will complement existing volatility measures of equity markets. Dispersion, which measures how differently stocks are performing or expected to perform, allows investors to model the impact of company-specific risk on a portfolio. This is achieved by measuring the variability of volatilities for single-name stocks relative to the volatility of the index itself.

Rob Hocking, Senior Vice President and Head of Product Innovation at Cboe, expressed confidence that the DSPX will provide investors with an additional perspective into market volatility, supplementing other volatility indices in their product suite. He also highlighted Cboe's unique position as a global exchange operator with unparalleled product innovation expertise.

The DSPX is calculated using a modified version of the VIX Index methodology, derived from prices of S&P 500 Index options and the single stock options of the S&P 500 Index's constituent companies. The index aims to help investors better understand how the S&P 500 Index moves relative to its constituent companies.

In addition to launching the DSPX, Cboe Labs plans to develop a futures product on the index to be listed on the Cboe Future Exchange. This move could potentially enable investors to manage their exposure and express views on SPX dispersion or transfer risk between SPX options and options based on the underlying S&P 500 Index constituents.

Cboe and S&P DJI are also scheduled to host a webinar on the new DSPX Index and the potential benefits of dispersion trading on Wednesday, October 4. Furthermore, the new index will be discussed at Cboe's Global Risk Management Conference (RMC) taking place from October 17-20, 2023, in Austin, Texas.

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