VIX Index’s Only Rival Facing Extinction
The Chicago Board Options Exchange (CBOE) Volatility Index, commonly known as the VIX, is the most widely used measure of stock market volatility. It is the only index of its kind, and has been the go-to measure of market volatility since its launch in 1993. However, the VIX has recently faced a challenge from a rival index, the Nasdaq-100 Volatility Index (VXN).
The Rise of the VXN
The VXN was launched in 2003 as a way to measure the volatility of the Nasdaq-100, a stock index that tracks the 100 largest non-financial companies listed on the Nasdaq stock exchange. The VXN was designed to be a more accurate measure of volatility than the VIX, as it was based on the actual prices of the stocks in the Nasdaq-100, rather than the prices of options contracts.
The VXN quickly gained popularity among traders and investors, as it was seen as a more accurate measure of market volatility. This led to a surge in trading volume for the VXN, and it soon became the second-most traded volatility index in the world.
The Battle for Market Share
The success of the VXN posed a threat to the VIX, as traders and investors began to shift their focus away from the VIX and towards the VXN. This led to a battle for market share between the two indices, with the VIX attempting to maintain its dominance and the VXN attempting to gain ground.
The battle between the two indices intensified in 2018, when the CBOE filed a petition with the Securities and Exchange Commission (SEC) to limit the trading of the VXN. The petition was denied, and the VXN continued to gain ground on the VIX.
The End of the VXN?
The VXN’s success has been short-lived, however, as the SEC recently denied a petition from the CBOE to limit the trading of the VXN. This decision effectively kills the VXN, as it will no longer be able to compete with the VIX.
The decision to deny the petition was met with criticism from some traders and investors, who argued that the VXN was a more accurate measure of market volatility than the VIX. However, the SEC argued that the VXN was not a necessary or beneficial addition to the market, and that it should be eliminated in order to protect investors.
The Future of the VIX
With the VXN now effectively dead, the VIX is once again the only index of its kind. This means that the VIX will remain the go-to measure of market volatility for the foreseeable future.
The VIX is likely to remain the dominant index for some time, as it is the most widely used measure of stock market volatility. However, it is possible that a new index could emerge in the future to challenge the VIX. Until then, the VIX will remain the only index of its kind.