The Great Migration: How hedge funds and active strategies profit from new instruments on regulated exchanges
The global financial crisis in 2008 unveiled three root causes of systemic risk: insufficient collateralization, excessive risk-taking and a cumbersome web of interconnectedness among market participants. Since then, regulators, policymakers, exchanges, and market participants have joined together to address systemic risk and to prevent future crises with their associated costs. The primary tool to that end was the obligation of central clearing for OTC derivatives via central counterparties and thus migrating from OTC to on-exchange trading.
Market participants have added momentum to this “futurization” of financial markets, having quickly realized how new centrally cleared instruments have greatly reduced trade processing cost (netting and better collateral management) while providing more stability, transparency, better risk management and counterparty access, and trade anonymity.
The Eurex Total Return Future (TRF) on the EURO STOXX 50 index is a prime example of this futurization process – an exchange-listed solution for implicit equity repo trading on the EURO STOXX 50 index. TRFs have gained significant traction and have taken over much of the flow that used to go to Total Return Swaps (TRS).
As part of the Total Return Futures portfolio Equity Total Return Futures (ETRF) and Basket Total Return Futures (BTRF) aim to support equities financing activities which are focused on collateral optimization and the use of equity collateral to raise financing. With this aim they also support the futurized, centrally cleared solution for equity financing.
Hear from industry experts:
Natasha Sibley, Fund Manager, Janus Henderson
Antoine Deix, Head of Dividend and Repo Solutions, BNP Paribas
Stuart Heath, Director, Equity & Index Product Design, Eurex
Nicolas von Kageneck, Senior Sales Manager, Eurex
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