By Tom Polansek
CHICAGO, July 29 CBOE Holdings Inc said on Monday it will expand trading hours for futures on the CBOE Volatility Index in late September, after a technical glitch delayed the change.
CBOE, operator of the Chicago Board Options Exchange, is aiming to increase overseas trading of its lucrative VIX futures by adding 5 hours and 45 minutes to the trading day in two stages. The biggest chunk of extra time will come during European trading hours.
"The bottom line is the more hours the VIX futures markets are open, the easier it will be for investors to hedge positions against fast-breaking news almost around the clock, except for Saturdays and Sundays," said Bill Luby, publisher of the VIX and More blog in San Francisco.
CBOE will add a 45-minute post-settlement trading period to the current trading hours of 7:00 a.m. CT (1200 GMT) to 3:15 p.m CT (2015 GMT) in the first phase of changes, aimed at U.S. customers. Following the close of trading Monday to Thursday, the market will reopen for a new trading period from 3:30 p.m. CT (2030 GMT) to 4:15 p.m. CT (2115 GMT).
Trading will then resume at 7:00 a.m. CT the following morning.
A second round of changes will begin "in the weeks that follow" the first phase, CBOE said in a statement. It will allow European-based customers to trade VIX futures during their local trading hours by beginning the current trading session at 2:00 a.m. CT Monday to Friday, instead of the current opening time of 7:00 a.m. CT, according to the exchange operator.
CBOE in February opened a communications hub outside of London to facilitate VIX futures trading.
The changes to trading hours are subject to regulatory review.
CBOE had initially planned to start extending the trading day in May. However, a half-day outage at the Chicago Board Options Exchange in April and another more limited outage exposed software problems that came about as it prepared for the expanded hours.
CBOE hired a consultant to review its systems after the glitches.
A CBOE spokeswoman declined to comment on Monday beyond the statement announcing the expanded hours.
"I would assume that they would not be taking this step if they did not feel comfortable with how things stand," Morningstar analyst Gaston Ceron said.
CBOE's proprietary products, led by futures and options on the VIX and the Standard & Poor's 500 Index, are a centerpiece of the exchange operator's offerings.
Trading volume of VIX futures totaled a record 4,213,488 contracts during June, eclipsing the previous high of 4,056,760 contracts in April 2013. June's volume was up 96 percent versus the 2,154,055 contracts traded in June 2012 and 31 percent compared to the 3,212,399 contracts traded in May 2013.
Trading hours will expand under the watch of Edward Tilly, who took over as CBOE's chief executive in May after longtime leader William Brodsky stepped down. The management change was announced in December.
CBOE is set to announce second quarter earnings on Aug. 2. Shares fell 0.02 percent.