Index Total Return Futures

A listed solution for implied equity repo trading

The Index Total Return Future (TRF) is an exchange-listed solution for implicit equity repo trading on the EURO STOXX 50® index. The futures complement the Eurex suite of equity index derivatives and help the market comply with financial market legislation.

Innovative and cost-efficient product

TRFs offer returns similar to Total Return Swaps (TRS) and are therefore a functional substitute for these OTC instruments.


Key Benefits

  • Removes the quarterly roll- and the dividend exposure risk
    TRFs provide access to long-term maturities while it removes the quarterly roll and dividend exposure risk that exists with EURO STOXX 50® Index Futures. Especially future rolls are historically volatile during the dense Eurozone dividend season with uncertainties on repo levels and financing risks.
  • Fully fungible product
    TRFs aim to cost-effectively replicate the payoff profile of OTC Total Return Swaps, creating a positive effect on capital requirements.
  • Portfolio margining
    Trade TRFs with other Equity and Equity Index ETDs within PRISMA, e.g., EURO STOXX® Futures for high netting effects up to 80%.


Assets

Why you should trade TRFs from a buy-side perspective:

  • Manage dividend risk
    Market participants trade TRFs as a substitute for the regular price index future due to the unique levels of volatility and dividend uncertainty. Given the total return nature of TRFs, price sensitivity to dividends is lower compared to price-return futures.
  • Calendar spread trading on the repo term structure
    In a TRF spread, the delta position on the index cancels out, as well as the overnight funding payments. The investor's cash flow depends on the short and long-term repo levels and the spot level. The repo exposure changes linearly with the spot. This is a typical strategy used by hedge funds or absolute return funds to trade on the calendar spread of two repos with different tenors.
  • Delta One beta replacement
    TRFs offer further benefits for institutional investors as a beta replacement with the short-term TRFs (1Y).
  • Downside portfolio protection
    Typically, insurance companies often buy downside protection for their portfolio against a potential market downturn, i.e. long-term "out-of-the-money" puts. They may wish to hedge their repo risk by buying the long-term implicit repos through a TRF vehicle. One of the main advantages of a futures product over an OTC swap is that it increases the number of available participants.  



Products

Market Makers

Market Makers

CompanyMember IDContactPhone number

BNP Paribas Arbitrage

BNAPA

Nicolas Certner

+33 1 55 77 82 47

UniCredit Bank AG

BVMMU

Quentin Maurice

+44 20 7826 6801

Goldman Sachs

GSIEB

Filip Hagman

+44 20 7774 3087

JP Morgan

JPMFR

Amandine Hedges 

+44 20 7742 4474

Société Générale

SOGFR

Philippe Perrier

+33 1 42 13 67 20

Optiver

OPXAM

Thibaut Herens

+31 20 708 7702


Articles


Further information

Find out how Total Return Futures work

What is a Total Return Future and what are its key features?

Regulatory changes are driving OTC business to listed solutions. The Eurex Total Return Future (TRF) on the EURO STOXX 50® index is a prime example of this futurization process. In this video, we explain the concept of Total Return Futures and its key features. The overnight funding rate is currently based on €STR + 0.085%. A full switch to just €STR is expected in the course of 2020.

How does the interaction with the market work?

Total Return Futures enable investors to trade the implied repo rate on the EURO STOXX 50® index. In this video, we explain how this calculation of implied repo works in TRFs.

What are the key differences between a TRS and a TRF?

Total Return Futures are the listed alternative to Total Return Swaps. In this video, we explain the key differences between the two products. * The overnight funding rate is currently based on €STR + 0.085%. A full switch to just €STR is expected in the course of 2020.

Contacts

Sales

Nicolas von Kageneck

T +33 1 55276-7 76

nicolas.von.kageneck@deutsche-boerse.com

Equity & Index Product Design

Stuart Heath

T +44 207 8 62-72 53

Marketing

Cora Meinecke

T +49 69 211-1 34

cora.alexandra.meinecke@eurex.com

Elena Marchidann

T +44 207 8 62-72 65

elena.marchidann@eurex.com