January will likely be remembered for the astonishing short squeeze of specific U.S. equities. That story probably isn't finished due to the repercussions in terms of how institutional investors view the collective influence of retail investors in popular stocks and stock options. In order to capture the latent demand emanating from Europe in U.S. technology giants, Eurex launched a new equity option segment covering the Xetra listed FAANG components.
Volatility emerged to hit a three-month high, touching 30%. This prompted strong trading volume in the VSTOXX® options. Other bright spots of activity were the EURO STOXX 50® Index Dividend Options and the related Banks Index Dividend futures. Market participants will closely watch company dividend policy announcements over the coming weeks. Eurex was able to provide much-needed clarity around dividend handling during the on-going pandemic to ensure market liquidity can be supplied with confidence to those investors and hedgers utilizing our single stock dividend derivatives and equity options. For those clients preferring to neutralize dividend timing risks, there remains a solid quotation picture in our EURO STOXX 50® Total Return Futures, as evidenced by the volume growth seen last month.
Elsewhere in other asset classes, Crude oil continued a revival. This prompted a burst of activity in the Oil & Gas sector futures and options. Both products enjoyed volumes +164% and +242%, respectively, compared to January last year. Emerging markets also continued their upwards trend only to reverse in the final week of January. The remarkable +85% performance from the Q1 lows of 2020 presented customers the opportunity to reassess positioning. This has fed through to robust volumes across our MSCI suite again, notably EM Asia futures and the EM options.
At the end of January, Eurex was able to move forward with the decision to reduce the outright tick size on our benchmark EURO STOXX 50® Index Futures. Here we take the opportunity to provide the market with several months advance notice prior to the actual change, which will be implemented the day after the June expiry. As with all tick size recalibrations, the purpose is to respond to customer demand after a thorough market consultation and provide an improved execution experience while maintaining the competitiveness of this globally important contract.
Zubin Ramdarshan, Head of Equity & Index Product Design, Eurex
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