Powering CFD Product Innovation with Cboe® Market Data

Invast Global recently launched a new Index CFD product utilising market data derived from the trading of the highly popular Cboe Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term Index® (the VIX® Index) futures contract offered by Cboe Futures Exchange℠.

This is additive to the suite of equity services which Invast Global currently provides, based on market data provided by Cboe.

James Alexander, Chief Commercial Officer of Invast Global, discusses the benefits of CFDs, the importance of market data in supporting the creation of these products and common misperceptions among brokers.

James, tell us a bit about Invast?

Invast Global is a provider of Prime Brokerage Services globally, allowing brokers, asset managers and hedge funds access to execution, clearing and custody services across a range of global markets in Equities, ETFs, Futures, Foreign Exchange and Precious Metals.

How does Invast make use of Cboe market data?

We find that Cboe market data provides utility in many ways. Firstly, Invast uses Cboe market data as the core data component of our Direct Market Access Equity and ETF contracts for difference (CFDs).

This is a fully integrated API solution for brokers incorporating both market data and exchange execution (long and short) via Direct Market Access.

The breadth of coverage provided by the Cboe data feeds combined with our own execution capabilities means that we can offer clients both pricing and execution over thousands of Equity and ETF CFDs.

More recently, we also launched a CFD utilising market data derived from the trading of the highly popular Cboe Volatility Index, or VIX Index.

As the VIX futures contract is the most actively traded, exchange-listed volatility futures contract, this CFD product is particularly well suited to our customer base who often incorporate volatility management into their trading strategies.

Risk teams within our broker clients will also monitor the VIX Index as a key benchmark in their own Risk Management Risk Management One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, Read this Term policies.

What were the reasons you chose Cboe market data?

There are several reasons. First, Cboe’s product coverage is vast, providing access to more than 15,000 of the world’s most active international securities originating across 19 countries. No other data package in the current marketplace is as comprehensive.

The second reason is cost. From both a licensing and usage standpoint, the Cboe data packages represent excellent value for money relative to similar offerings from other exchanges.

And, the final reason is more nuanced but every bit as important: Cboe has gone through considerable effort to understand the broker segment that Invast looks to serve and has designed market data policies across the set of products they offer, which consider and address the key requirements and concerns of the brokers we serve.

What trends have you observed since you launched your multi-asset API solution to brokers? Has there been a big uptake from CFD brokers for non-FX asset classes?

The COVID-19 outbreak really lit a fire under the demand for Equity and ETF CFDs.

The initial Equities market rout in February and March was followed by more “broad based” buying of ETFs and the larger U.S. tech stocks.

However, as the (quite remarkable) recovery continued, investors and traders became more targeted in their exposures, often aligning themselves with a number of different pandemic-related investment themes.

Now we’re seeing an accumulation of short positions, especially in some of the larger U.S. tech names.

For brokers, this volatility has driven a realisation that an Equity or ETF CFD when done well – i.e. using exchange data and Direct Market Access execution – can be a strong complement to a traditional Equity offering and also bridge the gap between Equities and FX offerings.

Are FX focused brokers open to expanding into Direct Market Access Equity and ETF CFDs?

They are, but there is a common misperception among FX-focused brokers that the integration lead time can be extensive.

So, there is often genuine surprise when we inform them that we can generally be production ready in Equity and ETF CFDs in two to three weeks.

The efficiency of the sign-up process with Cboe is a key reason we’re able to move so fast to integrate an Equity and ETF CFD product with our broker clients.

Once live, we provide comprehensive support, including access to our proprietary Broker Portal which makes Single Stock CFD operational workflows easy by alerting our clients about upcoming corporate actions and automatically handling dividends.

What other mistakes or common misconceptions relating to market data more broadly, do you come across when speaking with brokers?

Other common misconceptions, in addition to what I mentioned above, is that market data has to be complicated and expensive.

The traditional reporting burdens are the most common hesitation. Once brokers realise the benefits of the Cboe data package, for example, especially around non-professional usage, the response is overwhelmingly positive.

Another misconception is that brokers will require their own data vendor to consume market data. The fact that brokers can consume Cboe market data directly from Invast – either under license from Invast or under their own direct license with Cboe – provides a flexible, low-cost data solution.

Where do you see most of the demand from your brokers? Are there particular securities they want to offer their clients?

During the early stages of the COVID 19 Pandemic, demand on the long side came thick and fast for tech stocks like Zoom and Tesla, as well as some of the biotech and medical supply names.

We also saw demand for Activision Blizzard, the video games maker, so clearly not everyone was “working from home.” On the short side, airlines, travel and hospitality stocks were the main focus.

We also saw strong broker interest in ETFs, which are very well covered under the Cboe data packages as Cboe is the primary listing market for more than 450 ETPs across its U.S. and European venues.

The VIX Index is also seeing a lot of interest as Equity markets pull back from recent highs and volatility begins to come back in towards the end of the year.

If you could sum up Invast’s value proposition in a sentence, what would it be?

A genuine multi-asset Prime of Prime offering featuring a fully integrated execution and market data solution covering Equity and ETFs, Equity Indices, FX, Metals and Commodities.

What’s on the horizon for Invast? Any new products or initiatives you are working on or interested in?

We’re very excited to launch a fractional share offering across all Equity and ETF CFDs within the Cboe universe.

One key advantage of the fractional share offering is that it can better accommodate algorithmic trading, as well as allow for more precise construction and rebalancing of portfolios or bespoke share baskets for more active traders.

Invast Global does not accept applications from residents of Japan or the United States., and this information is not directed at any persons in Japan or the U.S.