Eurex is offering customers highly liquid instruments for directional trading and hedging of the German market with DAX Futures.
They are particularly suited to increase or hedge the return of equity portfolios benchmarking the German national index DAX - the blue chip index of Deutsche Börse AG for the German stock market - or for inter-market arbitrage. DAX Futures rank among the most popular instruments of institutional investors and proprietary traders and are increasingly used by retail customers worldwide.
During 2004, almost 30 million DAX Futures were traded on Eurex, the daily average volume was at approximately 113,000 contracts, which represents an increase of 7.5 per cent from the previous year's volume. Open interest stood at 189,852 contracts at the end of December 2004.
Definition and calculation of the blue chip index DAX
DAX comprises a selection of 30 blue chip stocks. In June 2002, the weighting of the index was changed to represent the free float market capitalisation of each component stock. Their individual market values amounted to a total index capitalisation of approximately EUR 458 billion at the end of December 2004. DAX is a performance index, which means it is assumed that all income from dividends and bonus distributions are reinvested into the index.
Its value is updated and disseminated every 15 seconds based on prices generated in the electronic trading system Xetra. It is calculated starting at 09:00 CET and closes with the prices from the Xetra closing auction, which starts at 17:30 CET. After the auction is over, a late index, L-DAX, is calculated, which provides an indication of market development after close of trading on Xetra and is calculated from 17:45 to 20:00 CET.
The index composition is re-evaluated on an annual basis. However, the index composition can also change during the year under special conditions (for example mergers and acquisitions).
Contract Specifications: DAX Futures
DAX Futures have a contract value of EUR 25 per index point of the blue chip index DAX. The minimum price change is 0.5 of a point, which is equivalent to a value of EUR 12.50. There are contracts available for the three successive quarterly months within the March, June, September and December cycle. The last trading day is the third Friday of each contract month 1, if this is an exchange trading day. Trading hours of DAX Futures are from 08:50 to 20:00 CET. On the last trading day, trading is terminated with the initialisation of the intraday auction starting at 13:00 CET in the electronic trading system Xetra.
Background notes: Germany represents one of Europe's biggest economies. In recent years, various reforms in Germany and the European Union have been enacted in order to increase the efficiency and competitiveness of the German capital market and to further improve investor protection. Deregulation and privatization efforts in Germany's telecommunications and energy sectors and the transition of Germany's pension system from state financing to an increasing reliance on private investing have encouraged more companies to raise funds in the stock market to pursue global strategies.
These developments provide the German stock market with the momentum it needs to align itself with the world's largest markets in terms of capitalization. DAX ®, the blue chip index of Deutsche Börse, provides an appropriate instrument to track this growth. Eurex offers its members and their customers the ability to electronically trade Futures and Options on DAX ®, the benchmark index of Deutsche Börse.