Index Total Return Futures

• Reduce balance sheet costs
  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® for high netting effects up to 80%.
• Increased transparency
  Based on a standardized set of contract specifications (standardized maturities), on screen liquidity providers, and having daily published settlement prices.
• Risk mitigation
  Provides the widest toolkit to support the structured products, allowing the hedging of delta, dividend, and repo exposure on the two biggest underlying benchmarks in Europe.
• Market access
  Total Return Futures are accessible for U.S. direct market access thanks to the CFTC approval.

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.

Market Makers