Interdealer broker GFI has launched a new service to provide risk managers with independent data for the estimated $2.6 trillion FX options markets.
The new service will set daily implied volatility surfaces for over-the-counter FX options for 20 of the most frequently traded currency pairs. Traders are expected to use the data for revaluing their FX derivative portfolios. The data will reflect actual, traded, inter-bank prices "live" with GFI, supplemented with quotes from the company's brokers.
The GFI "revaluation fixings" can be downloaded directly into institutions' risk management systems or into GFI's Fenic FX software. GFI is also delivering the service directly to Moneyline Telerate market data screens worldwide.
Tim Leitch, global head of FX options, JP Morgan Chase welcomed the move. "The market is in need of a transparent, independent, comprehensive and reliable service that delivers the FX volatility parameters necessary to revalue individual and aggregated FX options," he says.
Mike Binns, FX market specialist, GFI says: "We believe that providing the revaluation fixings and in a format which allows risk managers to input these into their own software promotes the most transparent solution for the whole marketplace - both buy-side and banks. Our early investigations concluded that any attempt to produce a 'black box' that simply delivers actual market prices would not offer a transparent solution and would ignore interdependencies between options within a portfolio."