Advantages of RIVET™-Backed Products

RIVET™ is the innovative methodology behind the creation of variance futures. If you want to trade volatility or hedge risks associated with the volatility of an underlying index, RIVET-backed products are standardized, centrally cleared futures products, traded using OTC conventions, with the economics of an OTC variance swap.

As exchange-traded futures contracts, RIVET-backed products offer:

  • Greater access for all market participants
  • Reduced counterparty risk
  • Increased transparency for trade data
  • Better access to daily mark-to-market values
  • Improved price discovery
  • Larger liquidity pools
  • Standardized contract terms

As listed products, RIVET-backed futures contracts provide point and click access to firm quotes. And the equivalent economics allow you to directly compare the listed quotes with OTC quotes.

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Image courtesy of Bloomberg Finance L.P.




RIVET for Economic Equivalence

If you make a trade in the OTC market, you’re required to post collateral against that trade. The collateral you post is still yours, though, and you’re free to earn interest on it. If you make the same trade in a centrally cleared futures product, you instead post margin against the trade. Margin is paid to the clearing house and no longer yours, so you can’t earn interest on that capital. The RIVET™ methodology aligns the differences between these two trades, making them economically equivalent.

RIVET for Spot Starting

In an OTC variance swap, the starting point of your trade is the closing price of the index the day you trade it. This is major hurdle when trying to align OTC trading practices with the listed market, where a contract needs a defined start date and end date. With the RIVET™ methodology’s strike compression feature, each trade represents a “spot starting” contract for that day with the realized portion of the contract already accounted for.

RIVET for Real Time Access

When you’re trading in the OTC market, it takes time to seek bids and offers and to receive verbal confirmations on trades.