First exchange to offer property derivatives in Europe
Success of recently launched dividend futures underscores growing demand for listed derivatives to complement OTC trading
The international derivatives exchange Eurex today launched Europe’s first property futures. The futures are based on the total returns of Investment Property Databank’s IPD® UK Annual All Property Index for individual calendar years.
Given the current market conditions, exchange listed, centrally cleared real estate futures bring added value to the derivatives market, e.g. mitigation of counterparty risks, standardization and transparency. This allows open ended property fund managers greater flexibility with risk and cash flow management and redemptions, unavailable in other property investment instruments.
Today’s launch marks another step in Eurex’s continuous efforts to add new asset classes to its existing product suite and to offer an exchange-listed alternative which complements the OTC market.
The advantages listed futures offer in terms of liquidity and transparency as well as risk handling, are born out in the success of another of Eurex’s recently introduced futures based on the dividends of the Dow Jones EURO STOXX 50® index.
Since its launch in June 2008, volumes have increased steadily – reaching a new peak in daily volume of 44,495 contracts on 5 February. Open interest has reached more than 148,000 contracts within only seven months. The index dividend is the first contract based on the pure dividend component of a major equity index that has been available for on exchange-trading and clearing on a stand alone basis.
Eurex’s Dow Jones EURO STOXX 50® index dividend future also complements the current OTC trading as some 84 percent of total volumes have been agreed bilaterally and entered into Eurex Clearing via the OTC Block Trade entry – one element of Eurex Clearing’s suite of wholesale trading facilities.