On Monday, the Chicago Board Options Exchange, Incorporated (CBOE) announced that its affiliate Market Data Express, LLC (MDX) will launch the CBOE Customized Option Pricing Service (COPS) on Monday, January 14.
The new data service, which uses the market-making expertise of CBOE’s liquidity-providing community, will offer subscribers end-of-day indicative valuations for “customized” options including FLexible EXchange (FLEX) options and some over-the-counter (OTC) options.
According to a CBOE press release, COPS had been designed from institutional investors requests, such as mutual fund and hedge fund administrators and risk managers for insurance companies and custodial banks, that needed the accurately priced value of custom options held in their portfolios on a daily basis. This comes from a U.S. Securities and Exchange Commission (SEC) requirement to produce daily customer funds reports that measures the Net Asset Value (NAV) of funds held in their portfolios by 4 p.m. Central time.
COPS may help institutional investors more efficiently manage this reporting process. It will differ from other valuation services by utilizing a single pricing model. COPS will rely on robust pricing models of multiple CBOE market makers to help generate indicative values for as many as 3,000 options series on 300 underlying options classes each day.
MDX will average the valuations submitted by market makers to them after the market close and then provide COPS subscribers with custom data based on those averages each day.
CBOE President and COO Edward Tilly said via a statement,?”We are pleased to introduce our new options valuation service, which is unlike any other. CBOE’s market makers continuously quote hundreds of thousands of standard options series each day. COPS is unique in that it applies this quoting expertise in standard options to customized options. The result is options values representing the collective pricing opinions of multiple, professional market makers.”
At the start, ?Wolverine Trading, Spot Trading and Sumo Capital will participate in the COPS program and will price all open FLEX options positions, OTC options and theoretical option prices for six index options.
For more information on COPS, see?www.cboe.com/COPS.