Cboe Global Markets, Inc. (Cboe: CBOE | Nasdaq: CBOE), one of the world’s largest exchange holding companies, have announced a collaboration with IHS Markit Ltd. (Nasdaq: INFO) and BlackRock, Inc. (NYSE: BLK), for Cboe to develop the first-ever broad-based U.S. corporate bond index futures.
The new futures’ groundbreaking design will leverage the deep and liquid iShares ETF ecosystem and iBoxx index expertise to create exchange-listed products that are designed to reflect the performance of the broad U.S. high yield and investment grade bond markets. The futures are expected to provide liquid hedging vehicles for institutional investors with exposure to U.S. corporate debt, and will be listed and traded on Cboe Futures Exchange, pending regulatory review by the U.S. Commodity Futures Trading Commission (CFTC).
Chris Concannon, Cboe President and Chief Operating Officer, said: “Cboe is thrilled to partner with IHS Markit and BlackRock to create the first index futures benchmarked to a diverse array of U.S. corporate bonds. We are especially excited by the ongoing opportunities we see in leveraging the expertise of IHS Markit in indices and BlackRock’s branding and market leadership in fixed-income ETFs. We believe this will provide our customers with a tool to mitigate credit risk in the corporate bond market.”
Aram Flores, Managing Director and Global Head of Indices at IHS Markit, said: “IHS Markit is delighted to join forces with Cboe and BlackRock in expanding the ecosystem of tradable instruments that reference iBoxx indices. We believe these contracts will bring additional liquidity to the fixed-income space, while providing investors with broad coverage to hedge against risk.”
Martin Small, Head of U.S. iShares at BlackRock said: “Index instruments are foundational elements of orderly and efficient markets and these index futures are a quantum leap forward towards better bond markets. A growing ecosystem of market access vehicles, chiefly bond ETFs and bond index futures are a critical step towards improving the price transparency and liquidity of corporate bond markets.”
Cboe expects to begin launching products in the summer of 2018, starting with the high yield corporate bond index futures. This allows a greater share of global market participants to access the $8.5 trillion U.S. corporate bond market through exchange-traded, centrally cleared instruments.
The index futures will be designed to reflect the performance of new IHS Markit iBoxx indices, which will include the publicly disclosed eligible holdings of the iShares iBoxx $ High Yield Corporate Bond ETF and the publicly disclosed eligible holdings of the iShares iBoxx $ Investment Grade Corporate Bond ETF. iBoxx corporate bond indices from IHS Markit provide a benchmark for active and passive investors, which is determined by multi-source pricing data, as well as analytical views on the sector, rating, maturity and size of constituent bonds.