The international derivatives exchange Eurex is expanding its sector index products segment by adding global sector futures denominated in US dollars, and has also announced plans to launc
The international derivatives exchange Eurex is expanding its sector index products segment by adding global sector futures denominated in US dollars, and has also announced plans to launch futures and options covering the European real estate industry.
Starting on August 18, futures will be available on the five global sector indices Dow Jones Banks Titans 30, Dow Jones Insurance Titans 30, Dow Jones Oil & Gas Titans 30, Dow Jones Telecommunication Titans 30 and Dow Jones Utilities Titans 30, while a US dollar-denominated futures contract on the Dow Jones Global Titans 50 Index will complement the existing futures contract in euros.
A month later, on September 22, Eurex will launch equity index futures and options on the Dow Jones Euro Stoxx Real Estate and Dow Jones Stoxx 600 Real Estate indices. Both real estate index futures will be included in the market-making programmes for sector index futures and options.
‘Investments in sectors have been gaining considerably in importance for some time now, with sectors becoming more and more global,’ says Peter Reitz, a member of the Eurex executive board. ‘We are addressing increasing globalisation and the trend towards growing sector coverage in advance. We are the first derivatives exchange in the world to offer our clients hedging opportunities for global sectors with our five new Titans futures.
‘We are also offering our clients investment opportunities in a new asset class – real estate – for the first time. The futures and options on the Dow Jones real estate indices allow hedging and investment strategies in the European real estate sector.’
Since the introduction of the first Eurex sector products in 2001, the trading volume of these products has increased steadily. Over the first six months of 2008, almost five million contracts were traded, with investor focus increasingly shifting in the last two years from the eurozone to the whole of Europe. Open interest in options and futures on sector indices is currently around 544,000 contracts, corresponding to a nominal value of nearly EUR9bn, the highest for sector derivatives at any exchange.
The underlying Dow Jones Sector Titans indices comprise the 30 largest companies of the respective global sectors and the new derivatives will allow trading in a total of 19 industries with the global banking, oil and gas, insurance, telecommunications and energy sectors. The real estate equity benchmark for the eurozone and pan-European region will be calculated by Stoxx from September as an independent index.
Similar to existing sector products, the newly-launched futures are settled in cash and have expiration dates in March, June, September and December. The contract size of the new products has been structured in the same way as their predecessors, with a Titans sector tick corresponding to a value of USD10, while a real estate derivative tick corresponds to a value of EUR5.
