Eurex is expanding its index derivatives segment with the introduction of 10 new sector products on the DJ Euro STOXX index. From 19 May Eurex will offer futures and options on the sectors Basic Resources, Chemicals, Construction, Cyclical Goods and Services, Food & Beverages, Industrial Goods, Non-Cyclical and Retail. This means the exchange will have derivatives on all 18 sectors of the pan-European index.
On the same day, Eurex is launching derivatives on the Insurance and Utilities sectors of the DJ STOXX SM 600. Up to now, futures and options have been tradable on the sectors Banks, Healthcare, Technology and Telecommunications of this broad Europe index.
“The Eurex sector-index products are the fastest-growing products in the international derivatives business,” says Eurex CEO Rudolf Ferscha. “The high potential of these products will also continue to be a contributing factor in the very high growth rates achieved at Eurex as the leading exchange in index derivatives.”
According to Eurex, the strong demand from market participants for sector-index products is based on the increasing application of trading strategies that are focused on individual sectors; and a growing number of institutional investors have come to appreciate the advantages of sector derivatives, which have a much higher diversification potential. The number of sector products is rising in the cash market as well, with exchange-traded funds and index certificates becoming more popular. This trend is underscored by active OTC trading in sector products.
As previously reported, Eurex will also continue to raise the level of efficiency in the clearing of these products. Therefore, as of June 2, 2003, Eurex Clearing AG will net offsetting risks from positions in derivatives on equities and indices in the same sector in its margining procedure. This bundling (so-called Cross Margining) reduces the margin requirements for Eurex customers, and thus the costs for the provision of collateral to secure transactions, by as much as 50 percent. The favorable trend in volume at Eurex in the trading of futures and options on the sector indices of the DJ Euro STOXX SM is continuing: During the first quarter of 2003, Eurex turned over some 1 million sector-index contracts, roughly quadrupling the volume posted in this segment compared with the first quarter of 2002 (226,000 contracts). The strongest product during this period was the option on the Banks sector with over 200,000 contracts traded.