Equity Index market briefing July 2020

For the first half of 2020, members and market participants have continued to operate under extraordinary working and living conditions. Their commitment to provide liquidity and facilitate best execution for clients, combined with Eurex's robust trading infrastructure, has proven vital to the market. Their support was seen through the substantial volume increases in a number of our benchmark products. EURO STOXX 50® Total Return Futures have been utilized by new clients as an alternative to a passive rolling futures strategy, given the uncertainty due to company dividend postponements and cancellations this year. The MSCI derivatives segment has enjoyed volume growth across several contracts; Japan, EM, World, Europe, EMU, Saudi Arabia, Canada, EM Asia & Latin America. One driver is that Eurex is viewed favorably as a stable venue for these key global contracts, given our long-term partnership with MSCI and the facility to transact during extended trading hours.

Q2 was also a significant period for the exchange in respect of nurturing our new ESG derivatives segment. We saw traction across the board, with more than 116 percent volume growth from Q2 2019 to Q2 2020, and open interest at EUR 650 million for all ESG products. Trading was mainly focused on the STOXX® Europe 600 ESG-X futures with activity also in STOXX® ESG Leaders Select 30 futures and options, plus the first trades already recorded in the MSCI ESG screened futures for EM, EAFE, USA, Japan and World. There was a recent new launch of the Related Security Spread Futures. In the first phase, this segment comprises 22 index futures capturing the spread between well-known dual-listed stock pairs. We are confident that the buy side will embrace these futures for whom share class arbitrage is a familiar strategy.

I want to end with initial observations on the new reduced calendar tick size for the EURO STOXX 50® index futures, coming from the Jun / Sep roll. This represents a significant change for all users, aimed at enabling the passive open interest holders to roll their positions at a more granular 0.25 tick as compared to the old and more costly, one tick wide regime. Early data paints a picture of roll execution shifting to the calendar order book and providing better price transparency. The roll trading range was also within expected tolerances, especially given the remaining dividend points pricing uncertainties. We will monitor developments for the next Sep / Dec roll to evaluate this vital liquidity measure in full. 

Zubin Ramdarshan, Head of Equity & Index Product Design, Eurex