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Stuart Heath, Director, and Elena Marchidann, Vice President and Global Product Lead for Derivatives Products & Markets at Eurex, share exclusive insights into the launch of systematic QIS index futures, explaining the rationale behind it and what to expect going forward.
What is behind the launch of systematic QIS index futures at Eurex?
Quantitative Investment Strategies (QIS) have been among the fastest-growing segments among buy-side firms, offering transparent, rule-based access to thematic and factor-based exposures that have traditionally been distributed as OTC swaps or structured notes.
Eurex has a long history in the futurization of OTC derivatives, having pioneered successful products (e.g., dividend futures and TRFs). The new QIS offering marks the next chapter in our futurization strategy and is based on market demand. We have been working closely with our clients and our strategic partner, Premialab, to bring a listed alternative to the QIS space.
What are systematic QIS index futures, and what do they offer clients?
Systematic QIS index futures are listed derivatives based on eligible QIS indices, typically designed by a bank or buy-side firm. The QIS futures are very similar to “plain vanilla” index futures from a product construct perspective and are designed to be easily scalable. We started with long-exposure strategies (two factors and one thematic) based on European equities from the STOXX® Europe 600 universe.
The new products will benefit from the traditional synergies of other listed offerings, in particular the distribution platform for buy-side clients who do not trade swaps or prefer trading listed products, as well as price transparency and portfolio margin offsets.
Who are you targeting to trade the systematic QIS index futures?
The new QIS offering will complement Eurex's existing index futures ecosystem by addressing demand for greater customization among sophisticated investors. The target audience includes hedge funds and institutional investors (e.g., asset managers, pension funds, sovereign wealth funds). In particular, institutional investors require execution and product transparency and often face constraints on the instruments they can trade (e.g., listed-only).
What were the biggest conceptual or technical challenges in transforming QIS from an OTC structure into a listed futures format?
QIS indices, which underpin OTC swaps and now Eurex futures, are customized, rule-based indices. A key challenge is ensuring robust risk management so that Eurex Clearing can accurately capture risk parameters from index histories or backtests. High turnover or frequent rebalancing can distort results. To address this, we worked closely with the Risk team to develop a framework that defines which indices are acceptable.
How did collaborating with Premialab influence the development process, and what did we learn from integrating external data and analytics into a Eurex-listed product?
Premialab is a leading player in the QIS data and analytics field and part of the plumbing between buy-side consumers and investment bank providers. So, on a simplistic level, we are tapping into those pipes to consume data. However, working closely with a market-leading partner gives you access to key participants in the QIS market and the insight and ability to focus on the core themes that Eurex products can bring to the market.
Looking ahead, how do you see QIS index futures evolving within Eurex’s broader futurization strategy?
The introduction of QIS futures is indeed the first step toward providing a clearing/listed product for a very large underlying market. Its development will enable end clients to access investment strategies more easily and help investment banks distribute them through a simple wrapper, while reducing their costs.
This aligns with our futurization efforts, which have primarily focused on dealer-to-dealer products to date. Now, we add a dealer-to-client layer to support growth in both our new and existing products by providing dealers with a hedge.
Our ambition is to expand our offering to include global indices, long-short relative-value strategies, and, ultimately, other asset classes.
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