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Eurex is extending its trading hours to cover the Asia Pacific time zone for liquid Benchmark Fixed Income Products. Some experts see this as a good opportunity to generate alpha for both the sell and the buy side. Are these early praises well deserved? We spoke to our Deputy Global Head, Fixed Income Trading & Clearing Sales, Byron Baldwin.
Byron, how do you see the opportunities for our customers?
I see significant opportunities to generate alpha for both the buy and the sell side. The extension, combined with the availability of Eurex’ T7 Trade Entry Services during the trading period, will enable trading of relative value/duration neutral sovereign bond yield spreads and butterfly/box trades between other Fixed Income Futures traded during the Asia Pacific trading day.
So, which products are you thinking of specifically?
JPX JGB Futures, ASX Bond Futures, KRX Korea Bond Futures and CME Treasury Futures, to name just a few. The extension of trading hours also opens up the possibility to generate alpha by initiating fixed income futures relative value/duration neutral butterfly or box strategies in the region. For example, the Bund/JGB/CGB Fixed Income Futures Relative Value Butterfly trade – long German government bond futures, short Japan and Australia government bond futures, duration neutral. One can also generate alpha with yield curve trades, executed between Eurex Fixed Income Benchmark Products with other Fixed Income Futures traded in the Asia Pacific time zone.
Are there other opportunities?
Yes! Being able to trade Eurex German Fixed Income Bond Futures during Asia Pacific trading hours will open up the ability to trade the various German yield curve strategies before Europe opens and, at the same time, will create benefits from reduced initial margin requirements from portfolio margining as a result of Eurex Clearing’s innovative PRISMA portfolio margining system.
All in all a positive development for everybody?
Definitely. Opportunities to the buy side and sell side will significantly increase by the extended possibilities to trade.