A member of
Eurex | Eurex Clearing | Eurex Group
Markets never liked uncertainty and the fear of an epidemic turning into a pandemic is felt by all. Despite the exceptional bout of volatility, the Eurex market infrastructure and liquidity pools in our benchmark products have proven to be robust. There was a surge in demand for hedging which naturally led to a flight to quality in terms of the choice of hedging instruments, with the largest derivative volumes executed in the EURO STOXX 50® index, Banks sector, DAX®, Mini-DAX®, VSTOXX®, STOXX® Europe 600, SMI®, EURO STOXX 50® dividends and TRFs. Due to the unfortunate spread of the virus outside of China, KOSPI 200 options were also heavily utilized for executing regional hedges. Futures demand driven by Asia-based clients was visible during our extended early trading hours where volumes have now surpassed 10m traded contracts since the launch of this service.
The VSTOXX® options gave the earliest hint of positioning, open interest was heavily concentrated on the front two expiries with upside calls concentrated on the March expiry. We observe that these call and call ratio spreads may have been partly financed by put spreads. The other leading indicator of market stress was the Total Return Futures (TRF) spread on the front month March 2020 contract which turned negative as the implied repo rate moved positive, potentially due to structural short positions in the market. Despite the volatility in the repo term-structure, open interest grows for the TRF and is now circa EUR 50 bn notional.
February marked the anniversary of the launch of our ESG derivatives segment, this was accompanied by the launch of the new STOXX® USA 500 ESG-X futures. The underlying index applies the same exclusion methodology as the widely traded STOXX® Europe ESG-X index future. Currently 37 components are excluded from the parent STOXX® USA 500 index. Another new product segment launched in Q4 last year seeing activity involves the MSCI index dividend futures. Here, we see order book quotes on MSCI EM, EAFE and World accompanied by light trading.
Eurex has been quick to respond to member concerns around a potential emergency situation and offered the possibility for trading participants to access Eurex markets from outside their notified and approved trading locations, to ensure orderly trading conditions. This should see liquidity remains available to all participants especially during these times of market stress, when it is most demanded.