Eurex allows investors to bet on future dividend streams

abdelaziz Fathi

Deutsche Börse’s derivatives-focused exchange, Eurex, has reported varied performance in its trading segments for January, with overall traded contracts seeing a 6 percent increase compared to the previous year.

The exchange reported a rise in traded contracts from 144.6 million to 152.7 million, indicating a steady demand in the derivatives market.

However, the growth was not uniform across all segments. Interest rate derivatives climbed by a third, with the number of contracts traded in January jumping from 54.7 million to 73.6 million. This surge reflects a growing interest in this particular segment, possibly driven by the current economic climate and interest rate changes.

In contrast, equity derivatives dropped 17 percent from 20.9 million contracts in the previous January to 17.4 million. Additionally, index derivatives turnover declined by 11 percent year-on-year in January, falling from 68.7 million to 61.4 million traded contracts.

Meanwhile, Eurex’s OTC Clearing segment reported an 8 percent year-on-year growth in notional outstanding volumes in January, reaching EUR 33,537 billion, up from EUR 31,083 billion. Additinally, the notional outstanding volumes in interest rate swaps rose by 9 percent to EUR 14,356 billion, while overnight index swaps saw a substantial increase of 32 percent, reaching EUR 3,300 billion.

Eurex Repo, the electronic market for secured funding and financing, also experienced a surge in activity. The daily GC Pooling volumes in January saw a remarkable increase of 57 percent, reaching EUR 128.9 billion. Furthermore, the overall average daily term-adjusted repo volume grew year-on-year by 33 percent in January, amounting to EUR 338.9 billion.

Eurex is set to broaden its dividend derivatives portfolio with the introduction of Mid-Curve Options on EURO STOXX 50® Index Dividend Futures. This expansion expands the exchange’s offerings, previously available only as an over-the-counter (OTC) product, and now accessible for trading on Eurex’s platform.

Mid-Curve Options, known as Swaptions in OTC terminology, are a type of listed option that expires on an underlying future with a longer expiry date than the immediately next settling future. These options focus on the dividends of the next five years, providing market participants with a refined tool for risk management and the ability to anticipate changes in dividend expectations.

With its dominant global market share of 86% in dividend derivatives in 2023, Eurex introduces these new products is part of its strategy to facilitate the transition of open interest and trading volumes from the OTC market to its platform. The exchange plans to leverage its TES Block Trade and Vola Trade functionalities, which offer the advantages of order book transparency.

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