European exchanges unveil MSCI derivatives
MSCI Europe index derivatives will soon be tradable on Eurex and NYSE Liffe
European exchanges Eurex and NYSE Liffe plan to list a range of new derivatives based on MSCI indices. From March, market participants will be able to trade futures and options based on the MSCI World, MSCI Europe, MSCI All Countries Asia Pacific ex-Japan and futures on the MSCI Frontier Markets.
NYSE Liffe will be the first to begin trading the new contracts, on 1 March. Eurex will follow on 11 March. Other derivatives on regional and country-specific MSCI emerging markets indices will be launched in July, bringing the total number of new index derivatives to 30.
The first index to be used will be the MSCI Europe Index, which is designed to measure the equity market performance of the developed markets in Europe, and consists of 16 country indices: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the UK. Sell-side market participants have welcomed the move, suggesting that it should help to increase liquidity and investor choice.
“Credit Suisse believes that the extension of the NYSE Liffe MSCI Europe Index futures product to an open order book will generate further growth in volumes and liquidity – providing end user investors with an operationally straightforward mechanism for accessing diversified beta,” said André Lamazouade, director of prime financing at Credit Suisse. “Credit Suisse will be an extremely active participant in the market and provide direct market access to its clients.”
All MSCI index-linked contracts are denominated in US dollars, except the MSCI Europe, which is in euros. On Eurex, maturities of up to 12 months are offered for futures and up to 24 months for options. Depending on the index, up to eight market makers will provide liquidity on the order book at start of trading. Eurex will not charge trading and clearing fees until the end of June.
The move has also been praised by the buy-side on the grounds that it should help market participants to cope with new regulations in Europe, under EMIR, that will require the central clearing of most OTC derivatives from next month. The remaining bilaterally-traded contracts will become very much more expensive under the new rules, due to increased collateral requirements.
“In the light of the upcoming regulatory changes, it’s very positive for us to have listed, liquid alternatives to OTC swap transactions,” said Eicke Reneerkens, head of derivatives trading at Union Investment.
