Equity Total Return Futures (ETRF) are part of the Total Return Futures (TRF) portfolio and build on the functionality of EURO STOXX 50®. ETRFs are designed to replicate the payoff of an equity swap based on the underlying shares of a company included in an eligible index. ETRFs are meant to be the basic building blocks for a customized Basket Trades of Equity Total Return Futures (BTRF). This package trade can consist of one or multiple ETRFs.
Benefit from standardization
The standardization of ETRFs and BTRFs leads to better risk management, improved capital efficiency and security when trading total return exposures on an equity benchmark like EURO STOXX 50®.
The building block for baskets
ETRFs are fully fungible contracts aiming to replicate the performance of an OTC equity total return swap (TRS). ETRFs represent the theoretical borrowing of cash to purchase the underlying equity at trade date, assuming it’s held till expiry, i.e., there is immediate exposure to the cash leg of the underlying equity. The holder of a long position will therefore receive the returns associated with holding the cash equity – against which they will pay the financing associated with this purchase. The cost of financing is comprised of the overnight funding rate and the determined traded "spread". This traded spread represents the additional rate, over the overnight benchmark funding rate, required by the seller to provide the returns of the cash equity until expiry.
The customized package
BTRFs are a package of multiple Equity TRFs constructed by traders within certain parameters concerning eligible equity shares. This negotiated and customized package of one or more ETRFs is traded with the same maturity and at the same TRF spread. Basket Trades at Eurex Exchange are incorporated within T7 Release 7.1.
How BTRFs work