Euronext, a prominent figure in the European capital market infrastructure, has made a significant move by introducing Total Return Futures (TRF) on the FTSE MIB Index. This benchmark is of great importance for the Italian equity market and builds upon the success of similar TRF on the CAC 40® Index, which was launched in 2018. With this new offering, Euronext is expanding its European derivatives presence in line with its innovative growth strategy for 2027.
Enhancing Market Access and Efficiency
TRF are ingeniously designed to replicate the economic aspects of OTC total return swaps in a cost-effective manner. By simplifying product settings, they become more compatible with the exchange environment, offering investors a seamless trading experience. The FTSE MIB Total Return Future specifically provides investors with a listed solution that grants them exposure to the implied equity repo rate of the FTSE MIB Index constituents. This is achieved in a transparent and secure trading environment through a centralised order book. The contract's long-term nature, with quarterly maturities available up to ten years, caters to the requirements of long-term investors, allowing them to plan their portfolios with greater certainty.For clearing purposes, the FTSE MIB TRF is facilitated by Euronext Clearing, which utilises its robust risk management capabilities. This helps to mitigate counterparty risk and provides strong margin offsets, ensuring the accuracy and fungibility of payoffs. The clear daily settlement procedure and the ability to trade at the index close add to the product's reliability. Market transparency is enhanced with on-screen prices, while leading market makers contribute to liquidity by quoting a spread as an annualised rate in basis points (+/-).Market Response and Future Prospects
Anthony Attia, the Global Head of Derivatives and Post-Trade at Euronext, expressed his enthusiasm about the introduction. In 2018, the TRF on the CAC 40® Index received an immediate positive response from market participants due to its strong benefits. Since then, over 1.6 million contracts have been traded, with a total nominal value of almost 120 billion euros. This new offering follows the successful migration of Euronext's financial derivatives markets to Euronext Clearing, opening up new avenues for innovation and the development of new products and solutions. As part of the "Innovate for Growth 2027" strategic plan announced in November, Euronext will continue to explore opportunities in the European derivatives landscape and leverage the full strength of its integrated pan-European model.Fiona Bassett, the CEO at FTSE Russell (an LSEG business), also expressed her delight. She stated that being part of Euronext's European derivatives expansion with the FTSE MIB Index TRF is a significant achievement. The collaboration between Euronext and FTSE Russell reflects the global strength of the FTSE Russell index franchise, enabling them to support clients with further innovation and product development to meet their diverse needs.This introduction of Total Return Futures on the FTSE MIB Index by Euronext marks a crucial step in the European derivatives market, offering investors new opportunities and enhancing market efficiency. It showcases Euronext's commitment to innovation and growth and its ability to deliver value to market participants.READ MORE