FX market round-up: FX index use is increasing
New FX indices have been separately launched by the International Index Company (IIC), the company behind the successful iBoxx bond and iTraxx credit derivative indices, and JPMorgan.
IIC, established in 2001 by a consortium of 11 banks and the Deutsche Börse, says the iBoxxFX trade-weighted indices will be calculated on 10 currencies. So far, Deutsche Bank is the first to promote the new product, which will trade in the over-the-counter market. It is expected that other consortium members will follow. Jason Batt, global head of FX index products at Deutsche, says there is a growing desire to trade basket products, and having one that is provided by multiple banks will add to their attraction.
“The feedback suggests that clients will appreciate a product that has multi-bank liquidity,” he says. “The indices provide an open standard and they are a much more intuitive way for people outside of the FX market to trade currencies,” says Batt. “We’ll have standard contracts, including spot, forwards and vanilla options, as well as structured products, such as guaranteed notes.”
Separately, JPMorgan, which is also a member of the ICC consortium, has launched what it claims are benchmark indices for G7 and emerging market implied volatilities.