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Introduction of Index Total Return Futures on iSTOXX® Europe Collateral Indices

Release date: 28 Jan 2020 | Eurex Exchange

007/2020 Introduction of Index Total Return Futures on iSTOXX® Europe Collateral Indices

Eurex Circular 007/20

1. Introduction

The Management Board of Eurex Deutschland took the following decisions with effect from 24 February 2020:

  • Introduction for trading of iSTOXX® Europe Collateral Index Total Return Futures and iSTOXX® Europe EUR Group 1 Collateral Large Index Total Return Futures;
  • Amendment of the Contract Specifications for Futures Contracts and Options Contracts at Eurex Deutschland (Contract Specifications) for Index Total Return Futures.

Production start: 24 February 2020.

This circular provides information on the introduction of the new products and amendment of the relevant Rules and Regulations of Eurex Deutschland related to trading. Information on the clearing of the new products as well as the amendments to the relevant regulations of Eurex Clearing AG are contained in Eurex Clearing circular 010/20.

This circular contains information on the introduction of new Index Total Return Futures on iSTOXX® Europe Collateral Indices (Collateral Index TRFs).

Attachment 2 contains the amendments to the Contract Specifications to implement the aforementioned decisions. 

As of the effective date, the full version of the amended Contract Specifications will be published on the Eurex website www.eurexchange.com under the following link:

2. Participation requirements

There is no specific action required for participation. Participants not currently trading Index Total Return Futures however should ensure systems readiness for trading. 

3. Details of the initiative

A.  Overview

iSTOXX® Europe Collateral Index Total Return Futures represent the theoretical financing of the underlying collateral index (i.e. its component equity collateral basket) at trade date assuming holding to expiry, i.e. there is immediate exposure to the equity components of the underlying index. The holder of a short futures position will receive the financing amounts based on the equivalent cash equity collateral basket – against which they will pay the associated equity total returns on that basket to the buyer. 

The finance amounts will be made up in part by the overnight funding rate and in addition the determined traded “spread”. This represents the additional spread required, in relation to the overnight benchmark funding rate, by the seller, until expiry.

iSTOXX® Europe Collateral Index Total Return Futures reference the following underlying instruments:

iSTOXX® Europe Collateral Index
    Currency: EUR
    Index type: Net Total Return Index
    ISIN: CH0443816332
    Bloomberg Code: ISXCOLEN Index

iSTOXX®Europe EUR Group 1 Collateral Large Index
    Currency: EUR
    Index type: Net Total Return Index
    ISIN: CH0478459768
    Bloomberg Code: IXE1CLEN Index

Euro Short-Term Rate (€STR)
    Currency: EUR
    Index type: Funding Rate
    ISIN: EU000A2X2A25
    Bloomberg Code: ESTRON Index

iSTOXX® Europe Collateral Index Total Return Futures will have the following product code:

iSTOXX®Europe Collateral Index Total Return Futures
    Currency: EUR
    Index type: Combined
    ISIN: DE000A26RR42
    Product code: TCBX
    Product type: FINX

iSTOXX®Europe EUR Group 1 Collateral Large Index Total Return Futures
    Currency: EUR
    Index type: Combined
    ISIN: DE000A26RR59
    Product code: TC1L
    Product type: FINX

B.  Underlying Collateral Indices

iSTOXX® Europe Collateral Indices represent a diversified basket of securities which meet broadly accepted criteria for general collateral. The index components are derived from the STOXX Europe 600 index and satisfy criteria on liquidity and borrow costs. In addition, only components which have no pending corporate event or dividend distribution are eligible for the index. The index is weighted by free-float market capitalization, with a cap at component level.

The components of the respective index and sub-indices are determined by the ISIN country code and exchanges.

The index review is conducted on a monthly basis and the design of the indices reflects broadly accepted criteria for collateral, especially in that it excludes any stock with a pending dividend prior to the next review. With this methodology dividends will routinely be excluded in the index calculation and hence the net total return version will be used as the underlying indices for Collateral Index Total Return Futures.

C.  Main features of Collateral Index Total Return Futures

Please refer to Attachment 1 for the main features.

D.  Trading hours (all times are CET)

Product Index Total Return Futures Contracts on the iSTOXX Europe Collateral Indices
Product ID TCBX, TC1L
Pre-Trading Period 09:25-09:30
Continuous Trading 09:30-17:25
Post-Trading Period 17:25-22:10
Off-Book Trading Period 09:30-22:00, Trade at Close (TAC): 09:30-18:00
Off-Book Post-Trading Period until 22:10
Last Trading Day, trading until 17:30

E.  Mistrade parameters

Mistrade ranges for the new Collateral Index Total Return Futures will be 25.0 basis points for all products. 

F.  Admission to the Eurex T7 Entry Services (TES)

Collateral Index Total Return Futures admitted for trading at Eurex Deutschland may be entered into the Eurex T7 Entry Service (TES) with a Minimum Block Trade Size of 100 contracts.

An overview of the Eurex T7 Entry Services available for the products and detailed information are available on the Eurex website under the following link:

G.  Data vendor codes

At start of trading, vendor codes for the new products will be published on the Eurex website under the link:

H.  Transaction fees

Please refer to Attachment 1 for the transaction fees.

I.  Risk parameters

As of start of trading, risk parameters of the new products will be published on the Eurex website under the link:

and on the Eurex Clearing website www.eurexclearing.com under the following path:

Attachments:

  • 1 – Main features of Collateral Index Total Return Futures, transaction fees
  • 2 – Amendments to the Contract Specifications for Futures Contracts and Options Contracts at Eurex Deutschland, effective 24 February 2020


Further information

Recipients:All Trading Participants of Eurex Deutschland and Vendors
Target groups:Front Office/Trading, Middle + Backoffice, IT/System Administration, Auditing/Security Coordination
Contact:Stuart Heath, Elena Marchidann, Equity & Index Product Design, stuart.heath@eurexchange.com, elena.marchidann@eurexchange.com
Web:Index Total Return Futures
Authorised by:Michael Peters
 

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