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Equity Index Highlights - January 2018 edition

Release date: 24 Jan 2018 | Eurex Exchange

Equity Index Highlights - January 2018 edition

Market briefing

2017 was another year of new record highs in global equity markets supported by the recovery of the global economy and the ongoing expansive monetary policy by international central banks. Side by side with rising index levels, volatility levels in equity markets reached new record lows. The uncertainties about the outcome of the French elections in April and a possible escalation around the North Korean conflict in August have been the only two major events last year with substantial effect on volatility levels. Despite the record low levels, trading volumes in the European volatility benchmark VSTOXX® showed considerable growth. Traded VSTOXX® Futures & Options contracts volume increased by more than 50% y-o-y.

With the introduction of Total Return Futures on the EURO STOXX 50® Index by the end of 2016 Eurex started to offer an alternative to over-the-counter (OTC) traded equity index Total Return Swaps. Since launch, more than EUR 20 billion notional has been traded which reflects a substantial market share only one year after launch. Capital efficiencies by applying portfolio margining is a key benefit of listed solutions for our clients. This is also reflected in the ongoing growth of our global MSCI offering. MSCI derivatives contract volume grew by 128% compared to 2016. Mainly driven by the interbank market in the past years we expect more institutional clients joining the listed market in 2018.

A further innovation in the listed market was the introduction of Market-on-Close Futures (MOC) on the EURO STOXX 50® Index. It allows investors to trade the basis in a cost-efficient and transparent way. Eurex MOC Futures are the answer to an increasing demand for passive investments and inflow/redemptions based on the daily close of an index. Last but not least, we want to highlight the launch of the iSTOXX® Europe Factor Index Futures. Constantly growing volumes since launch clearly show the trend and demand towards factor investing. Eurex' iSTOXX® Europe Factor Index Futures allow investors to extract risk premium by combining long/short positions between factor and benchmark futures or a long/short combination of different factors itself.

For 2018 Eurex would like to wish all of our clients a successful year and we would like to continue with your support and our commitment to innovate the derivative markets to the best possible way in order to further increase its attractiveness for all investors and clients.

Philipp Schultze
Head Sell Side Relations Europe Equity & Index Derivatives

Facts & figures


At a glance

At Eurex Exchange, the 2017 volumes stood at 1,676 million traded contracts, a slight decrease compared to 2016 (1,727 million contracts).

On Wednesday, 3 January 2018, the long-awaited overhaul of the Markets in Financial Instruments Directive - MiFID II - finally became a reality. The lead-up was challenging for all involved, but it also inspired stakeholders to find the best solutions together. Learn how Deutsche Börse Group tackled MiFID II - as a strong partner to customers and regulators alike.

MiFID II started the probably largest structural change that Europe's derivatives markets have ever experienced. In order to keep pace with the regulatory requirements, Eurex launched a new price discovery service for the OTC space. With Eurex EnLight, the exchange is venturing into a new realm - beyond regular order book-based exchange trading. Read our interview with Randolf Roth, Member of the Eurex Executive Board, how Eurex has taken MiFID II as an opportunity that goes far beyond solving regulatory issues.

Product News

Our VSTOXX® Derivatives experienced a record year with a total of 23.5 million traded contracts, up 53% from 2016. Futures and options recorded an ADV of 53,000 (+33% y-o-y) and 39,000 (+90% y-o-y) contracts respectively. The French election in late April brought the VSTOXX® to global attention, as investors sought to use an EUR-denominated European volatility index to hedge their risk. On 24 April, VSTOXX® Futures and Options had a record volume day with 272,000 contracts across the entire product complex. This was preceded by a record open interest on 17 April, with more than 2 million open contracts between the futures and options.

It is always good to report statistics when there is record event driven volume; however for the VSTOXX® Futures, the investors that started trading the product leading up the elections, seem to have stuck around for the remainder of the year. Futures ADV peaked in April at over 62,000 contracts, however remained over 50,000 for six out of the remaining eight months.

What you won't see in the data is the migration of the VSTOXX® complex out of the product development phase. In 2015, Eurex implemented a three-step strategy to support growth in the VSTOXX®, with special emphasis on opening up the volatility options and ETN market to U.S. participants. Besides, we introduced a new Market-Making program that shrunk the average bid/ask size from over 10 ticks wide to just over a tick and grew the average size on the bid/offer from less than 50 contracts to over 200. In December 2017, over 90% of the VSTOXX® Futures volume was traded in the order book.

In February, we launched CFTC-certified Options on VSTOXX® Futures. The migration to the new, U.S.-friendly product has already proven successful as the VSTOXX® Options open interest currently stands at over 500,000 contracts - more than a year ago (~325,000 contracts). Additionally, due to the nature of the U.S. options market structure and several new Market Makers, volume has picked up rapidly in the options order book. In December, over 36% of VSTOXX® Options were traded on-exchange.

Finally, Velocity Shares in partnership with UBS, launched two VSTOXX® ETNs on BATs in May 2017.

With the three products in place, Eurex is expecting market participants to grow their footprint in European volatility in 2018.


2017 was yet another year of records for Eurex MSCI Derivatives. Futures volumes grew by 128% with over 11 million traded contracts compared to 4.8 million in 2016 and open interest was 1.37 million following the December expiry compared to 563,000 at the end of 2016. Options activity was not so frothy but saw 828,000 traded contracts and an open interest at 255,000 at year-end, 40% and 52% gains respectively with the MSCI Emerging Markets and MSCI World contracts contributing to this relatively modest growth.

Interbank business continued to dominate activity with an estimate that real money trading accounts for little more than 15% of current business though expectation sees greater buy side activity as new market regulation finally takes effect in 2018 and the exchange focusses even harder on the money managers.

Stand out futures contracts last year were based around Emerging Markets with the titular MSCI Emerging Markets Index Futures (FMEM) contract seeing volumes increase over 800% to 613,000 contracts, MSCI China Free Index Futures (FMCN) volumes rose to 786,000 contracts and the MSCI Emerging Markets Asia Index Futures (FMEA) 1.4 million saw significant increases. In the developed space, MSCI Japan grew over 900% with just shy of 1 million contracts traded and North America screaming onto the pitch with 223,000 contracts, a growth of 23,680%. A small drop in the EUR-denominated MSCI World (FMWN) contract was offset by a far larger gain in the USD-based contract bringing their combined volume to over 1.6 million contracts. The EUR-based MSCI Europe Index Futures (FMEU) saw an 8% reduction in volume to 1.6 million contracts but this was compensated by a seeming switch into the USD-denominated MSCI Europe Index Futures (FMED) contract that grew over 900% to 475,000 contracts.

Eurex Exchange does now see the highest global open interest figures and whilst the majority of business takes place in the TES environment both the MSCI World and Europe contracts are developing well on screen and this is being increasing recognized by the real money players, 2018 should see further positives in this respect.

Extensive portfolio-theory research has observed that equity returns can be explained by risk factors that are supplemental to market risk.

Investors who are able to expose their investment to such factors may obtain premium returns.

STOXX alongside Alpha Centauri have together developed an innovative range of indexes: the iSTOXX® single factor indexes. Based on investor demand, Eurex introduced futures on six iSTOXX® Europe Factor indexes in May 2017. Eurex' new offer comprises instruments for investors that allow them to capture factor risk premia associated with the STOXX® 600 Europe benchmark.

iSTOXX® Europe Value, Carry, Momentum, Size, Low Risk and Quality Factor Futures are available for trading. Read more on the development of the iSTOXX Europe factor index family in 2017 in the "iSTOXX Europe Quarterly Update" newsletter published by Alpha Centauri.

Since the launch, Eurex futures on these six iSTOXX® Europe factor indexes have been a success: passing 190,000 traded contracts in January 2018 with open interest exceeding 200 million Euro.

Launched on 2 December 2016 with 552 contracts traded, TRF on the EURO STOXX 50® Index support the market in complying with new financial market legislation. Under the Basel III capital standards, banks face increased capital requirements when entering over-the-counter (OTC) transactions. In addition, the regulator introduced bilateral margin rules on non-cleared swaps.

Statistics after one year confirm a strong take-up from major market players with over 540,000 traded contracts (EUR 20 billion notional) mainly as TAM trades / ADV 2.133 contracts / more than EUR 9.5 billion notional open interest. The number of participating members is continuously increasing; currently, 12 dealer banks and clearers as well as 5 IDB's.

Agency business (cleared volume) counts for 20%. Buy side clients from France, the U.S. and out of Asia started to become active in TRF. Banks confirm the transfer of OTC TRF exposure into TRF on expiring client trades as well as present onboarding of end clients not having access to the OTC TRS market before.

Furthermore, the CFTC approval and the introduction of further expirations up to 26 maturities (DEC27) provided a further kick to the volume development.

The Eurex/KRX Link, established in 2010, offers both KOSPI 200 Options and Mini-KOSPI 200 Futures for trading on Eurex Exchange during European and U.S. trading hours. The products are fully fungible, meaning positions are traded during the course of a day on two different exchanges and netted at the beginning of the following trading day on KRX. Currently, over 125,000 KOSPI 200 Options and around 400 Mini-KOSPI 200 Futures are traded on average per day on Eurex. Six Market Makers are providing quotes ensuring liquid products for Korean as well as international investors. In Eurex KOSPI 200 Options the daily record trading volume in 2018 was 417,997 contracts on 10 January.


Discover a new way to source liquidity - watch the video to learn more about how our new service provides efficiencies to the OTC market.

Eurex has enhanced its existing market structure with the electronic price discovery service Eurex EnLight, which allows banks and brokers to selectively contact Market Makers with requests for quotes (RFQ) in order to find a trading counterparty. Orders are then automatically transmitted to Eurex' T7 Entry Service for exchange trade confirmation and post-trade processing. Eurex plans to expand its new service to equity index products in Q1/2017. To learn more about Eurex EnLight, please do not hesitate to contact Philipp Schultze at T +41-43-4 30-71 26 or your local Sales representative.


GlobalCapital awarded Eurex Exchange twice this year. For the third time in a row, Eurex was honoured as "European derivatives exchange of the year". The award as "Global derivatives exchange of the year" is a first. With no less than two awards our overall offering and product diversity to trade and hedge risks across a broad range traditional and alternative asset classes has been widely recognized.

The FOW International Awards recognize the best performance in the cleared derivatives industry over the judging period, which runs from July to the end of June each year. With the recent award, Eurex Exchange has been recognized as leader and innovator in the industry. Eurex took home the award for  "Most Innovative New Contract" in the category equities and equity indexes as well as "Prop Traders' Exchange of the Year". In the region Middle East and North Africa (MENA), Eurex received an award as  "International Exchange of the Year".

To learn more about our products and services, please do not hesitate to contact your local Sales representative, visit our website or follow us on Twitter @eurexgroup and LinkedIn.

Kind regards,
Markus-Alexander Flesch
Global Head Equity & Index Sales

Eurex Exchange - The broadest choice of Equity Index Derivatives worldwide.


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