Deutsche Börse’s derivatives arm, Eurex, launches bitcoin ETN futures

abdelaziz Fathi

Eurex, the European derivatives exchange owned by financial titan Deutsche Börse Group, plans to launch trading on bitcoin exchange-traded note (ETN) futures, effective September 13.

Deutsche Borse

The Germany-based trading venue said the novel ETN futures contract is physically backed by bitcoin and tracks the BTCetc Bitcoin Exchange Traded Crypto index, which is listed on the Frankfurt Stock Exchange.

More specifically, Eurex’s new contract will be traded in euro and physically delivered in Bitcoin ETNs. The latter, which is equivalent to 1/1000th of a Bitcoin at launch, is fully backed by and redeemable in the primary cryptocurrency.

According to the announcement, this centrally cleared offering will be the first regulated market in Bitcoin-related derivatives in Europe.

An ETN is a type of unsecured debt obligation payable to the contract holder. It has a maturity date and tracks an underlying asset or a particular index. ETNs holders receive a one-time payment on expiry date, based on the performance of the underlying asset, but they can also sell the contract any time on the open market.

In effect, Eurex bitcoin ETN futures provide investors with the opportunity to gain “regulated on-exchange” exposure to the performance of bitcoin without actually purchasing the leading crypto asset. This is in contrast to technical difficulties related to creating a blockchain wallet and learning how to securely store crypto assets in a noncustodial fashion.

There are now three bitcoin ETNs listed on Germany’s Xetra platform. ETC Group was first listed in June 2020, followed by crypto ETP issuer 21Shares and US asset manager VanEck.

Commenting on the new product, Randolf Roth, Member of the Eurex Executive Board said: “There is significant demand from instutional investors to gain Bitcoin exposure in a secure and regulated environment. We are pleased to be the first regulated exchange to offer this innovative contract. The new Bitcoin ETN futures enable investors to trade and hedge Bitcoin within Eurex’s proven trading and clearing infrastructure without the need to turn to unregulated crypto venues or set up a separate infrastructure, such as a crypto wallet. It is the logical extension of the ETN that already trades very successfully on Xetra.”

Eurex has recently seen a change to its corporate structure in light of a rapidly shifting regulatory climate and market structure. The exchange also saw its trading volumes booming amid concerns over the global spread of the coronavirus outbreak.

The implementation of MiFID II legislation was particularly relevant for the marketplace group as well. As one of Europe’s leading derivatives marketplaces, Eurex has had to adapt and shift its structure in light of these new regulations. This has resulted in adapting its existing setup in Switzerland while also bolstering its offering in Asia.

In 2020, Eurex’s long-serving Andreas Mitschke has taken over as head of the trading surveillance office. At the time, the exchange said that one of the most important tasks that Mitschke will be responsible for is to reverse the combined supervision of Xetra and Eurex, two of the largest venues for trading equities and exchange-traded funds in Europe.

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