The investment behaviour of the buy side is undergoing structural changes, with passive products like exchange-traded funds (ETF) gaining momentum, according to Eurex.
Eurex says this changes the investment behaviour on the derivatives markets and increasingly shapes the product offering of exchanges.
“The growing success of indexation via ETF has brought index providers further to the forefront of asset allocation – not only on the investment side, but also in trading,” says Eurex CEO Thomas Book.
Especially broad based indices like MSCI and Stoxx600 are profiting from that trend. In September, Eurex’ MSCI segment reached one million contracts of open interest for the first time.
Historically, MSCI has been the index provider of choice for the buy side seeking broad and reliable benchmarks to compare with their own performance and looking for tools to analyse risk and returns. Globally, roughly 40 per cent of all ETF assets in equity products are based on MSCI indices. With more providers of MSCI related vehicles and a growing competition on pricing these, an increased need for cost-effective and efficient hedging tools in the form of futures and options arises.
As a result, Eurex is steadily extending its product range. The exchange lists the majority of bench-marks used by fund managers worldwide. Since the beginning of 2016, the turnover in Eurex’ MSCI segment amounted to more than 3.7 million contracts; compared to 1.6 million contracts in the whole of 2015.
“These figures indicate a strong trend”, says Book. “We support the buy side by offering a total of 72 futures and 15 options in the MSCI universe.”