10 November 2016
Frankfurt
Reporter: Mark Dugdale

Eurex to launch total return futures


Eurex will begin offering total return futures on the Euro Stoxx 50 Index from 2 December.

The new futures contract design is aimed at replicating the payout profile of the funded purchase of a cash equities basket representing the components of the underlying index.

The total return futures will trade in ‘spread’ in basis points and allow the implied repo rate associated with cash basket replication to be traded for the first time.

Basel III capital standards are already increasing the cost of over-the-counter (OTC) trades and new rules for non-cleared that are likely to come into force next year will encourage a move to exchange-traded derivatives.

"The product is launched ahead of the bilateral margin rules on non-cleared swaps which are likely to be introduced in Europe in early 2017,” commented Mehtap Dinc, global head of derivatives product development at Eurex.

“We therefore expect market participants to cut back on their OTC swap positions and instead choose futures to meet their trading and hedging needs in the months to come.”

Total return futures will offer returns analogous to total return swaps, added Dinc, making them a functional replacement.

The new swaps will also bring the additional benefit of standardisation, which allows netting. Eurex Clearing acting as central counterparty will also mitigate counterparty risks.

Régis Lavergne, deputy global head of equity derivatives in charge of trading activities at Natixis, expects larger market participants to adopt the new total return futures, “and the transparency and fungibility they provide, to meet their hedging needs in the months to come”.

More swaps news
The latest news from Securities Lending Times
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
LCH launches new SwapClear client account
14 August 2017 | London | Reporter: Drew Nicol
J.P. Morgan and Aviva Investors are among the first adopters of this new account type
OneChicago expands futures products
05 July 2017 | Chicago | Reporter: Drew Nicol
The new No Dividend Risk Friday Futures will be available from 24 July 2017
French elections revive European markets
03 May 2017 | Frankfurt | Reporter: Drew Nicol
The first round of the French election prompted rallies in Europe’s beleaguered equities markets, while fixed income also saw sharp corrections, according to Eurex
Eurex secures KfW as IRS clearing client
05 April 2017 | Frankfurt | Reporter: Drew Nicol
German government-owned investment bank KfW has looked to Eurex Clearing for IRS clearing services
Traiana enhances swaps offering
27 February 2017 | London | Reporter: Drew Nicol
Traiana has launched a new suite of services to allow swaps providers to electronically manage payments and confirmations in equity swaps
BrokerTec eyes up e-MID purchase
27 January 2017 | London | Reporter: Drew Nicol
BrokerTec is on track to acquire a controlling majority stake in e-MID SIM, the first Italian electronic central limit order book platform for inter-bank deposits and overnight indexed swaps...
CME boasts record-breaking peso IRS activity
19 January 2017 | Chicago | Reporter: Drew Nicol
Derivatives marketplace CME Group achieved a record-breaking January trading day by clearing more than MXN 1 trillion (USD 45.53 billion) interest rate swaps in a single session...