Eurex Exchange's MSCI news - December 2016

The recent U.S. uncleared swap margin, capital and segregation requirements have generated significant interest in the Eurex MSCI Futures and Options complex. This has manifested itself in both the increase in enquiries made to the exchange from new locations and in the steady climb of open interest in MSCI Futures and Options, that as of Thursday, 17 November 2016, stands at over 920k contracts equating to in excess of USD 22.6 bn of market exposure. To put this in perspective, the OI at the end of November 2015 was 254k contracts, which represents almost a four fold increase this year.

The MSCI EM Asia Index Futures contract (Bloomberg: ZTWA) has seen over 275k traded contracts since the beginning of July 2016 while open interest now stands at over 85k contracts equivalent to USD 3.5 bn. The more established MSCI World Index Futures in EUR & USD (Bloomberg: RSWA & ZWPA) and Europe (Bloomberg: ZRPA) have traded over 1 mln contracts, with open interest at over 317k contracts, equating to over EUR 6.7 bn of exposure.

After consultation with users the exchange intends to introduce the following measures in order to support further growth:

• Introduction of quarterly expiries in all MSCI Futures for the first 3 years maturities
• Harmonizing the last trade date between country and regional MSCI products
• Introduction of a volume-based revenue sharing scheme
• Extension and amendment of the Market-Making programs for 2017

For further information please refer to Eurex Circular 116/16.

Review Highlights - November 2016

MSCI ACWI Index:  55 securities will be added to and 34 securities will be deleted from the MSCI ACWI Index.

MSCI World Index: the three largest additions measured by full company market capitalization will be Dong Energy (Denmark), First Data Corporation A (USA) and Dassault Aviation (France).

MSCI Emerging Markets Index: The three largest additions to the measured by full company market capitalization will be China Huarong Asset Management H (China), Weibo Corporation - ADR (China) and Electrobras ON (Brazil).

MSCI Frontier Markets Indexes: According to the MSCI statement, MSCI Select WAEMU Countries Indexes will be included in the MSCI Frontier Markets Indexes as part of the November semi-annual review, as long as relevant requirements are met. The West African Economic and Monetary Union countries are Benin, Burkina Faso, Ivory Coast, Guinea-Bissau, Mali, Niger, Senegal and Togo.

The SAIR review will be effective as of December 1, 2016. The MSCI Select WAEMU Countries have a pro forma weight of 1.12% in the MSCI Frontier Markets Index, based on data as of October 19, 2016.

MSCI's next semi-annual review will take place in May 2017.

Background on index review

In order to maintain their indexes up to date, MSCI generally have two major reviews:

• Quarterly Index Reviews (QIRs) in February and August
• Semi-Annual Index Reviews (SAIRs) in May and November

While QIRs are aimed at reflecting significant market events or moves of (new) companies, SAIRs are used to update indexes on the basis of a fully refreshed equity universe. The re-balance is based on rules-based analytical criteria (e.g. market performance or market capitalization as well as accessibility), but also on extensive consultations preceding the re-balancing per se.

If you have any further questions on our MSCI Derivatives, please do not hesitate to contact James Brown at T +44-20-78 62-72 12 or Ralf Huesmann at T +49-69-211-1 54 43 or visit our MSCI website.

Kind regards,

Eurex Exchange - The broadest choice of Equity Index Derivatives worldwide.