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In perspective (part II): The rise of the buy side

Release date: 08 Apr 2019 | Eurex Exchange, Eurex Clearing

In perspective (part II): The rise of the buy side

In the first part of this article we talked about the fundamental changes in our industry and the challenges and opportunities that these bring. One interesting and important fact is the rise of the buy side. Over the last couple of years, the buy side has started to undertake certain activities themselves, activities which they had previously relied on traditional commercial banks to undertake. Together with the trend to passive investments, this strengthens the role of the buy side in the financial markets.

The buy side taking over banking functions is, in general, a good thing as it can support economic growth. By attracting buy side flow to our regulated and transparent markets, we support the transition to the new regulatory world that might come along with new rules for the so-called shadow-banking sector. 

We are enhancing our market models to attract as much diversified flow as possible to our main tool, the central limit order book. As there is also a need for large-scale business, we have developed solutions to attract this heterogeneous flow on exchange as well. With new market models we will support the buy side while at the same time serve the sell side’s needs. Since we believe that volumes and liquidity rise if markets are well organized, three new mechanisms enhance organization, transparency and fairness: Eurex EnLight, Eurex Improve and Eurex Passive Liquidity Protection. 

New products to support the buy side

We have launched a broad suite of products to support the buy side. Market-On-Close (MOC) futures are a technical solution to trade index futures at the index close level before the index close is calculated. 

Since the launch of our new ESG Futures on 18 February, almost 20,000 contracts have been traded in this segment that applies Low Carbon, Climate Impact and Exclusion criteria to existing benchmark indices. Open Interest currently amounts to almost 15,000 contracts. We have also recently received approval from the Commodity Futures Trading Commission (CFTC) to offer our sustainable futures in the U.S. as of 8 April.

Another major topic in this context is our MSCI product suite, which saw another record quarter in Q1/2019 with over 4.7 million traded contracts – a year-on-year growth of 67 percent. We are the only exchange offering a comprehensive suite of products consisting of futures and options on regional and country indexes: currently, 116 MSCI futures and 20 MSCI options are available.