The Montréal Exchange Launches a Volatiliy Index

The Montréal Exchange has partnered with the index provider Standard & Poor's for the creation of a Canadian volatility index, the S&P/TSX 60 VIX® (ticker: VIXC). Launched on October 18, 2010, the index reflects the real-time price fluctuations of options on the S&P/TSX 60 index, which comprises the shares of the 60 largest companies in Canada.

VIX has negative correlations to the stock market historically and is considered a useful tool to hedge the potential downturn of the broad equity market. While the S&P/TSX 60 index options have various expirations, VIXC indicates the implied volatility of the fixed 30-day period.

Index construction

The S&P/TSX 60 VIX approximates the 30-day implied volatility that is derived by the near-term and next-term options on the S&P/TSX 60 index (SXO). Options roll to the next-term five calendar days prior to expiration. CORRA (Canadian Overnight Repo Rate) and 1-, 2-, and 3-month CDOR (Canadian Dealer Offered Rate) rates are used to interpolate the risk free rates of each maturity.

About the S&P/TSX 60

The S&P/TSX 60 index covers approximately 73% of Canada's equity market capitalization, and represents the Canadian component of the S&P Global 1200 index. The S&P/TSX 60 addresses the needs of investment managers who require a portfolio index of the large-cap market segment of the Canadian equity market. Adequate liquidity is a prerequisite for all constituents, allowing for efficient portfolio replication and minimal tracking error. The S&P/TSX 60 is part of the S&P/TSX index series, which provides the building blocks for portfolio construction.

Vendors' access codes

Vendor	Code
Bloomberg	VIXC
Reuters	.GSPVIXC

Other indicators at the Montréal Exchange

The SXF contract on the S&P/TSX 60 is the benchmark financial instrument used primarily by institutional investors to hedge a portfolio of Canadian equities. The SXF contract has become a leading market indicator; by observing the behaviour of the SXF during the pre-opening period (between 6:00 a.m. and 9:30 a.m.), Canadian media and investors have an opportunity to anticipate the opening direction of trading on the Toronto Stock Exchange. To learn more about the S&P/TSX 60 Index Futures, view our short presentation at http://m-x.na4.acrobat.com/sxf_leading_indicator/.

In the Canadian financial markets, bankers' acceptances are the barometer of short-term commercial interest rates. The BAX contract on three-month Canadian bankers' acceptances is an important indicator of the Canadian money market. Starting at 6:00 a.m. every morning, BAX prices tend to reflect future interest rates in response to economic news published before the opening of the regular session.

For all business related questions, please contact our Customer Relations representative at 1-866-871-7878 or by e-mail at info@m-x.ca.

Claude Cyr
Senior Vice-President, Financial Markets
Montréal Exchange

Montréal Exchange Informational Site

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Warning and disclaimer

This document is sent to you on a general information basis only. The information provided in this document, including financial and economic data, quotes and any analysis or interpretation thereof, is provided solely on an information basis and shall not be interpreted in any jurisdiction as an advice or a recommendation with respect to the purchase or sale of any derivative instrument, underlying security or any other financial instrument or as a legal, accounting, tax, financial or investment advice. Bourse de Montréal Inc. recommends that you consult your own advisors in accordance with your needs. All references in this document to specifications, rules and obligations concerning a product are subject to the Rules and Policies of Bourse de Montréal Inc. and its clearinghouse, the Canadian Derivatives Clearing Corporation. Although care has been taken in the preparation of this document, Bourse de Montréal Inc. takes no responsibility for errors or omissions and it reserves itself the right to amend or review, at any time and without prior notice, the content of this document.

Bourse de Montréal Inc., its directors, officers, employees and agents will not be liable for damages, losses or costs incurred as a result of the use of any information appearing in this document.

"VIX®" is the trademark of the Chicago Board Options Exchange ("CBOE"), used by Standard & Poor's Financial Services LLC ("S&P"), TSX Inc. ("TSX") and its affiliates with the permission of CBOE. "S&P" is the trademark of S&P and "TSX" is the trademark of TSX. The VIX Methodology is the property of the CBOE. CBOE has granted S&P a license to use the VIX Methodology to create the S&P/TSX 60 VIX index and has agreed that S&P may permit values of the S&P/TSX 60 VIX index to be disseminated. Neither CBOE nor S&P nor TSX or their respective affiliates makes any representation regarding such index or the advisability of relying on such index for any purpose. Neither CBOE nor S&P or their respective affiliates sponsors, endorses, sells or promotes any investment product that is or may be based on the S&P/TSX 60 VIX index. Neither TSX nor its affiliates sponsors, endorses or promotes any third party investment product that is or may be based on the S&P/TSX 60 VIX index.