GFI Preps Global Implied Index Volatility Data

Interdealer broker GFI is to expand its implied volatility data service for equity index options to cover major indexes in Europe and the US, in addition to its existing focus on Asia-Pacific indexes, officials say.

GFI originally launched its Index Implied Volatility service in 2008, providing implied volatilities for index options on the Kospi 200, ASX 200, Nikkei 225, and the Hang Seng and Hang Seng China Enterprises indexes in Asia, updated in real time, and next month will extend the service to cover options on the CAC, DAX, FTSE 100 and Euro Stoxx in Europe, and the Standard & Poor's 500, Nasdaq 100 and Russell 2000 in the US, says Philip Winstone, global head of sales for GFI Market Data in London.

The broker built out the expanded coverage over the past four months to give the service appeal to banks outside Asia, where it is being used by risk management departments to help reduce the value-at-risk (VAR) of their index options business, as well as their trading in the individual equities underlying the indexes, he says. The system captures prices from over-the-counter trades brokered by GFI, as well as information from exchanges, and uses in-house-developed analytics to derive values for implied volatility.

GFI is currently trialling the new data with clients, and is seeking vendors to redistribute the data. Winstone says the data will be available via Thomson Reuters' DataScope suite of back-office data products, but has not confirmed any desktop delivery mechanisms for it-though he says traditional displays are less likely to appeal to the service's core target clients in middle- and back-office risk functions.

"It's about delivering data in a way that fits peoples' needs, and a feed is more useful for middle and back offices. We're not targeting front-office users who need desktop delivery, but mainly risk management functions, people performing evaluations, and people who have equity derivatives on their books and are looking to better manage their VAR numbers," he says.

The broker will also pursue direct sales, whereby bank clients will be able to pull data from GFI's FTP server as often as they require - from near-real time to daily, weekly or monthly. "We don't want to prescribe how clients should use the data, so we are not offering it as only two updates per day plus one at end of day, but we are streaming data into the product, and allowing clients to take it how and when they want," Winstone says. "We appreciate that not many clients will be performing risk management in real time, though some of our clients are moving more towards intra-day views of risk."

The service should appeal to tier-one firms that do not have quantitative analysts in-house producing their own calculations, and to tier-two and tier-three firms, as well as service bureaus, he adds.