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Liquidity in ESG derivatives: Q&A with Susquehanna

Release date: 27 Nov 2019 | Eurex Exchange

Liquidity in ESG derivatives: Q&A with Susquehanna

With the introduction of the STOXX® Europe 600 ESG-X options, Eurex further extended its ESG derivatives suite and is the first exchange to offer sustainable futures and options on leading European benchmarks. 
Susquehanna, a global quantitative trading firm, has been providing liquidity since the launch of the ESG futures and will now offer liquidity in the STOXX® Europe 600 ESG-X Index Options (OSEG) as well. Eurex spoke with Daniel Mannion, Derivatives Sales Trader at Susquehanna International Group, on the role of providing liquidity in the ESG futures & options market.

Daniel Mannion,
Derivatives Sales Trader at Susquehanna International Group 

 
What is the implication of now having an options market for ESG investors? What needs will it fulfill? 

The fact that Eurex can launch options on ESG is a sure sign the market is maturing. There's genuine demand for these products and now investors can use options alongside the futures to tailor their risk profile in a way that best fits them and their strategies

What does ESG mean for a market maker like Susquehanna?

As a global market maker, Susquehanna has followed the evolution of ESG products to meet the growing demand with interest. We are proud to be the first market maker in Europe, quoting ESG options on screen and will continue our role in the devolvement of these products, providing liquidity to support their continued growth.

What does having a market maker mean for the contracts? What are the benefits?

Susquehanna committing to market make these ESG contracts means there will always be sufficient liquidity and consistent two-way pricing available to investors. Having prices on screens at all times brings transparency to the product and allows end-users to analyze prices before making investment decisions. Then, when it’s time to trade, there's a tradeable price available, or clients know they can contact us via our sales desk if they prefer to deal over the phone or through chat. The ability to open, close or price risk at any time due to the presence of Susquehanna as a market maker brings a lot more confidence in the product for investors. It's also a sign of commitment to the product from Susquehanna, one of the largest traders of listed options globally.

What is your view on the evolution of listed ESG derivatives?

Well, like many new derivative listings, they are a response to demand. We've always found Eurex to be proactive and ahead of the curve in responding to the needs of the market and. The ESG futures and the options listing is a prime example of that. Demand for these products is still in its infancy, and as more and more investors look to get involved, we should see a virtuous circle of tighter spreads and increased liquidity.

How do you see the trend for ESG or sustainable investing evolving, say, in the next two years?  

We've only scratched the surface on the potential demand for these products and the options listing will further expand the use of ESG derivatives. Climate change and environmental stories feature the news daily in a way that was unthinkable only five years ago. We see a growing interest in these products, from both our institutional client base and the market at large.

Why does Susquehanna think it’s important to support new products?

Throughout our 30-year history as a firm, Susquehanna has always been at the forefront of innovative new products coming to the market.  Over the years, we've worked very closely with Eurex to provide liquidity and support new products that they introduce. As examples, we were involved in the launch of V2X and weekly options at a very early stage and have worked closely with the exchange throughout the launch of their Enlight platform. The creation of our options sales desk several years ago enabled us to extend our support for these products in the ‘upstairs’ market. In this arena, we bring our liquidity and execution expertise to bear more directly to the institutional buy-side and all of our trading partners, facilitating the growth of the products as interest and usage expands.  


About Susquehanna

Susquehanna International Group, LLP, or SIG, is a global quantitative trading firm founded with an entrepreneurial mindset and a rigorous analytical approach to decision making. First established in the U.S. in 1987, SIG is today one of the largest privately-held financial institutions in the world, with over 2,000 employees globally, with more than 500 based in Europe. In Europe, the market maker is Susquehanna International Securities Limited, which is regulated by the Central Bank of Ireland. Susquehanna’s trading operations span equities, fixed income, commodities, energy and foreign exchange markets, among others, across four continents around the globe. 
Throughout its history and expansion, SIG has remained focused on its core businesses in listed derivatives and index products and has long been established as one of the biggest liquidity providers in options and ETFs in the U.S. and European markets. We commit our own capital to trade financial products around the world, and build virtually all of our own trading technology from scratch. Our traders, quants, developers, and systems engineers work side-by-side to develop and implement our trading systems and strategies, dedicated to providing efficient liquidity to the markets in which we are active. Each individual brings their unique expertise every day to help us make optimal decisions in the complex and dynamic global financial markets.


Contacts

Daniel Mannion
Daniel.Mannion@sig.com
Sales desk : +353 1 8028118
Direct: +353 1 5677210

 

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