Eurex, a part of Deutsche Börse Group, will expand its pioneering Total Return Futures (TRF) segment with a contract on the FTSE 100 Index.

By cooperating with FTSE Russell, Eurex is further expanding its collaboration with leading index providers in its strategically important index segment. Scheduled for March 29, 2021, the launch underlines Eurex’s goal to support the global shift towards regulated on-exchange trading with central clearing, as well as passive investments.

With this step, the exchange responds to the demand from many clients for a TRF contract covering the UK equity market. Furthermore, it demonstrates that TRFs are a pioneering example within the futurization theme.

Michael Peters, CEO of Eure, comments:

“Increased margin pressure, capital requirements and demand for electronic execution are moving OTC segments into futurized listed derivatives. Our innovative TRF offering provides great benefits to address these topics. We are pleased to partner with FTSE Russell to further expand this novel area in particular”.

Waqas Samad, CEO FTSE Russell, head of Investment Solutions, LSEG, says:

“We are delighted to work closely with Eurex in meeting growing investor demand for risk management products on the widely used FTSE 100 benchmark index. Our collaboration with Eurex reflects LSEG’s commitment to supporting clients across the markets and communities that we serve, the strength of the FTSE Russell index franchise and the ability of Eurex to meet client needs with innovative solutions”.

TRFs aim to replicate the returns of traditional bilaterally negotiated equity or equity index-based swaps. However, compared to a bilaterally negotiated swap, central clearing enables portfolio margining, simplifies settlement and mitigates counterparty risk.

The new TRF contract complements Eurex’s existing TRF suite, which includes further index TRFs, individual Equity TRFs and equity Basket TRFs. Eurex launched the TRF segment in 2016 with the listing of the first Total Return Futures on the EURO STOXX 50 Index. Equity Total Return Futures on 255 stocks and the new basket trade functionality followed in October 2019. Since launch, Eurex has managed to migrate over 50 per cent of the EURO STOXX 50 OTC market to its product. Current open interest stands at 1.5 million contracts.

Complementing the FTSE 100 index TRF, Eurex will also introduce dividend futures, as well as regular futures and options on the FTSE 100 Index. By providing these linked products at the same time, participants can benefit from lower margins from the outset due to Eurex’s portfolio-based margining approach. The launch of additional dividend futures addresses increased risks that have emerged in recent times.