With Related Security Spread (RSS) Futures, Eurex introduced a new type of product back in June 2020. A second phase is being launched in March. Zubin Ramdarshan, Head of Equity & Index Product Design, at Eurex, talks about the development of RSS Futures in general and the specifics of the newly launched products:
Zubin, with RSS Futures you promised new types of product benefits. How did this workout and how have the RSS Futures developed?
With the Phase 1 launch we were able to validate the concept with several RSS Futures recording small volumes. The anticipation is, with Phase 2, that we add the pairs in high demand, which should add further stimulus to client interest in this new segment.
What are the main reason for this development?
The RSS Futures facilitate the strategy of trading dual-listed stocks via a transparent, simple and efficient listed index derivative. What would ordinarily be a multi-leg cash market execution also involving stock borrowing and FX hedging, is now replaced by a simple index calculated by STOXX / Qontigo. The expectation is that, by offering order book quotation for these stock pairs, we will draw in new participants who were previously not involved in this strategy space.
Eurex just recently added new products to the RSS Futures. What is special about them?
With Phase 2, we add RSS Futures that cover stock pairs where the legs trade in different currencies and different timezones, for example: Rio Tinto UK in GBP vs Rio Tinto Australia in AUD. The premium and discount movement versus long-term averages for these pairs is therefore driven by additional pricing dynamics and, as such, should provide interesting trading opportunities.
How do you see the further development of these types of products?
It is likely we will extend the range of RSS Futures by adding new products where we see client demand, this may also include stock pairs from the same industry sector group at a later date.
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