European equity index provider Stoxx has announced plans to launch the Dow Jones Euro Stoxx 50 DVP (Dividend Points), its first official calculation product that provides pure dividend dat
European equity index provider Stoxx has announced plans to launch the Dow Jones Euro Stoxx 50 DVP (Dividend Points), its first official calculation product that provides pure dividend data of the Dow Jones Euro Stoxx 50 Index, on June 16.
The Euro Stoxx 50 DVP has been licensed to international derivatives Eurex to serve as the underlying basis of its Dow Jones Euro Stoxx 50 Index Dividend Future, which will be launched on June 30.
Eurex says the introduction of its index dividend future represents the first time that the pure dividend component of a major equity index has been available for trading and clearing on a stand-alone basis at any exchange.
‘The Dow Jones Euro Stoxx 50 DVP is an innovative calculation that enables investors to hedge short selling of the Euro Stoxx 50 Index and the possible resulting dividend impact,’ says Werner Buerki, chairman of the Stoxx supervisory board.
‘This data product proves again the leading role of the Euro Stoxx 50, the major index for the euro zone, with respect to indexing innovation and further sophistication of index-linked investment products. It is a natural step for our customers to use the dividend points of this popular index as the basis for their dividend products.’
Eurex board member Peter Reitz says: ‘The Euro Stoxx 50 Index Dividend Future will enable investors to take a view on the dividends that are announced and paid by the individual constituents of the index in each year. The exchange listing of the dividend element of the index separates the dividend risk and increases the investor’s ability to focus on the fundamentals that determine equity values.’
The Euro Stoxx 50 DVP represents ordinary unadjusted gross cash dividends declared and paid by the individual components of the DJ Euro Stoxx 50 Index.
Historical data is available back to December 31, 2004. The Euro Stoxx 50 DVP is calculated at the end of day and disseminated in real time via the CEF data feeds from Deutsche Börse.
Eurex will initially offer annual contracts from December 2008 out to December 2014 that capture the dividend stream in that annual period in the form of index point equivalents, making the product complementary to the benchmark traded Dow Jones Euro Stoxx 50 Index derivatives.
The contract will be cash-settled based upon the actual ordinary gross dividends declared and paid in respect of the shares of each individual constituent in the contract period. The final value of the dividend calculation will be undertaken by Stoxx using the specifications in the Euro Stoxx 50 DVP rulebook.
Eurex says the primary aim of the dividend futures is to offer a futures contract that is of use to both sell-side market-makers and to the complete range of buy-side participants.
The index dividend future complements Eurex’s current OTC trading with the advantages of standardised clearing and settlement. The current daily turnover in OTC index dividend swaps is estimated at almost EUR1bn daily, with index dividend swaps on the Euro Stoxx 50 making up the majority of trading.
