Aside from the US and the China futures market, the European futures market also offer exciting opportunities and unique futures products for traders to express their trade ideas and conviction.
In this post, let's explore Eurex Exchange, the largest futures market in Europe!
What is the Eurex Exchange?
The Eurex Exchange is Europe's largest futures and options market, where it primarily deals in Europe-based derivative products.
Through Eurex Exchange, a wide range of products can be traded, from European stocks to debt instruments of Germany.
Interesting facts about the Eurex Exchange:
The Eurex Exchange is headquartered in Germany, and is run by the Deutsche Borse AG and SWX Group.
Until 1998, trading in the US and UK was carried out in the open outcry style. The Eurex Exchange was one of the first in the world to provide a fully electronic trading platform
In present day, the Eurex operates in 9 offices worldwide, namely Chicago, London, Paris, Tokyo, Hong Kong, Singapore, Leipzig, Eschborn, Zurich, and Frankfurt (HQ).
5 subsidiary companies of the Eurex:
The Eurex consists of 5 subsidiaries, namely:
#1 Eurex Exchange
Deals in the trading of global derivatives. It is the most liquid, euro-denominated equity index and fixed income derivatives exchange.
#2 EEX
An energy exchange in Europe. It covers the trading of the spot and futures product of natural gas, power, emission allowances, and coal.
#3 Eurex Clearing
The exchange’s central counterparty for derivatives transactions executed on the Eurex platform, and for equities, bonds, and repo transactions executed on other platforms.
#4 Eurex Bonds
The group’s electronic trading system for off-exchange, wholesale trading in Bubills or treasury discount papers and also in fixed income securities. Government bonds issued by national governments are the core products traded on this platform.
#5 Eurex Repo
An electronic over-the-counter marketplace. It is based on an internet platform for international repurchase agreements.
Top 5 most actively-traded Eurex products
There is a suite of trading products on Eurex, which consists of 9 asset classes:
Interest rate derivatives like Fixed Income, Money Market, Interest Rate Swaps.
Equity index derivatives from benchmarks like EURO STOXX, DAX, and MSCI.
Equity derivatives from more than 1000 futures and 700 options in 19 countries.
Volatility derivatives such as VSTOXX and variance futures.
Dividend derivatives such as single stocks and indexes
FX Derivatives such as rolling spot futures, classic FX futures, and options
Commodity derivatives such as exchange-traded commodities
Property derivatives such as IPD UK quarterly index futures
ETF derivatives from i-Shares, Lyxor, and more
Below are the top 5 most actively-traded Eurex products:
#1 Euro-Bund Futures (FGBL)
The FGBL is a futures product that mirrors the performance of the notional value of 10-year federal bonds with an interest rate of 6%.
The price of FGBL is in a negative correlation between the yield (interest) and the price of a bond. Simply put, when interest rates rise, the price of bond will fall.
In other words, FGBL will rise when the yield when the yield on Bunds (the debt securities of Germany) are expected to fall (and vice versa).
Generally, market participants or traders who are exposed to interest rate risk like to use the FGBL to hedge against the risk of interest rate fluctuation.
#2 EURO STOXX 50 Index Futures (FESX)
The FESX is a futures product which tracks the performance of the EURO STOXX 50 index.
Introduced in 1998, the EURO STOXX 50 index is made up of the top 50 blue chip stocks (in terms of free-float market capitalization) from 11 countries in the Eurozone.
#3 Euro-Schatz Futures (FGBS), Euro-Bobl Futures (FGBM), and Euro-BTP Futures (FBTP)
The FGBL is a futures product that mirrors the performance of the notional value of short term debt instrument assigned by the Federal Republic of Germany with an interest rate of 6%.
The FGBM is based on the notional value of bond assigned by the Federal Republic of Germany that represents a basket of deliverable bonds with a remaining maturity of 4.5 to 5.5 years and an interest rate of 6%
The FBTP is based on the notional value of long-term bonds issued by the Italian government with a maturity of up to 16 years. It has an interest rate of 6%.
#4 EURO STOXX Banks Futures (FESB)
The FESB is a futures contract that is derived from the EURO STOXX Banks index, which tracks the performance of the Eurozone banking sector.
Below are the top 10 companies in the EURO STOXX Banks index as of 31st October 2024:
Verdict: Explore the vast potential of the European futures market!
In this post, we've explore the various products of the Eurex exchange, which is the largest futures exchange in Europe.
In Part 2, we'll look at equities index derivatives in Eurex!
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Disclaimers
Any of the information above is produced with my own best effort and research.
This post is produced purely for sharing purposes and should not be taken as a buy/sell recommendation. Past return is not indicative of future performance. Please seek advice from a licensed financial planner before making any financial decisions.
Leverage is a financial tool that comes with its advantages and risks. Please learn and understand both the upsides and downsides of leverage before using it for trading.
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