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Markets rallied in October as the threat of a disorderly no-deal Brexit got pushed down the road again and U.S. / China trade talks progressed positively. Some major benchmarks touched all-time highs, starkly contrasting the aggressive Q4 retracement that started in the same month last year. Despite the corresponding drop in volatility, record volumes were seen in our EURO STOXX 50® Total Return Futures as client participation expanded. We anticipate similar growth trajectories in the recently launched Equity TRFs (ETRF) and related Basket TRF (BTRF) as members prepare to activate the products. The EURO STOXX® Banks index dividend futures also reached a notable monthly record. Here, the sustainability of the current high dividend yields of European bank stocks came into question once the negative interest rate environment becomes a long-term feature.
The other volume record happened in our STOXX® Europe 600 ESG-X future, indicating solid liquidity as it came during a non-roll month. The ESG segment was expanded by listing ESG index options, another first for the exchange world. The options provide tools for structured product issuers to recycle their forward and volatility exposures related to new ESG products, something that seems to be in high demand at private banks. Clients can also look forward to further ESG derivatives listings at Eurex as the recently extended partnership with MSCI will incorporate new global ESG indexes.
With equity markets buoyant, it might seem tempting for investors to slip into complacency. However, option volumes were showing double-digit growth compared to October last year in DAX, Euro STOXX 50® month-end as well as the respective weekly index options. This suggests that clients are taking the opportunity to hedge market risk and are already locking in some 2019 gains. And, as we close in on another successful year, Eurex doesn't grow complacent either as we're preparing exciting new product launches aimed at the alternative risk premium space. Stay tuned for further announcements.
Zubin Ramdarshan, Head of Equity & Index Product Design, Eurex