trading russian derivatives at eurex · pdf file–secondary listing of russian companies...

Trading Russian derivatives at Eurex Exchange Focus on RDX® USD Index

Tobias Ehinger

Senior Vice President

26 March 2013

www.eurexchange.com

Trading Russian derivatives at Eurex Exchange 26 March 2013

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Introduction

Russian derivatives at Eurex Exchange

• Russia continues to be one of the most attractive emerging markets – Relative low valuations – Growing financial market

• Trading in the local Russian market is still challenging for foreign investors

– Secondary listing of Russian companies abroad via Depository Receipts (DRs) – DRs are easily accessible for foreign investors – DRs avoid the cost of holding and trading international shares and other costs or risks

associated in trading locally

• As a result, two main liquidity pools established over time – Local shares traded at Moscow Exchanges Micex-RTS – Depository receipts (DRs) traded at London Stock Exchange (IOB)

• Most Russian companies are listed at LSE • DRs on Gazprom are among the most liquid shares traded on LSE

• Main product at Eurex Exchange is the RDX® USD Index with a daily turnover of more than

5,000 contracts traded in 2013

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Overview of Russian derivatives offering

• Since 2006, Eurex Exchange is offering Russian equity and equity index derivatives – Index derivatives – Equity options – Single stock futures

• All equity derivatives are based on London Stock Exchange traded Russian depository receipts

– Equity options • Physical settlement • Up to 24 months • Denomination in USD

– Single stock futures • Cash settlement • Up to 36 months • Denomination in USD

• Index futures and options are available on

– MSCI Russia price index – RDX© USD price index

• For all Russian derivatives EurexOTC Trade Entry services are available

– OTC entry (block trade, vola trade) – Flexible contracts (tailor made)

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Russian derivatives at Eurex Exchange

www.eurexchange.com


Success factors to create liquidity

4

Product

IT Infra-

structure

Market

participants

RDX® USD

Index

derivatives

Market

participants

IT Infra-

structure

www.eurexchange.com


5 5

RDX® USD Index

RDX® USD Index currently consists of 15

components

• Index provider: Vienna Stock Exchange

• Introduction in 1997

• Index components are only listed and traded

ADRs/GDRs on London Stock Exchange (IOB)

• Maximum weight is 20 percent (quarterly

rebalancing)

• Price index

• Number of stocks is not fixed

• Bloomberg code: RDXUSD Index <GO>

• Licenced to more than 130 issuers

More info: (http://www.indices.cc/indices/details/rdu/facts/)

Methodology and composition

Source: Bloomberg, as of 8 Mar 2013

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Market access on the cash market

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Trading of Russian underlying at LSE (IOB) and Moscow Exchange

Source: London Stock Exchange, Moscow Exchange

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Contract specifications

RDX® USD Index derivatives

RDX® USD Index Futures (FRDX) RDX® USD Index Options (ORDX)

Contract value USD 10 per index point

Contract terms Up to 36 months

(4 quarterly and following

4 semi-annual maturities)

Up to 60 months

(12 expirations)

Minimum price change 0.50 index points (5 USD) 0.10 index points (1 USD)

Settlement Cash settlement

Final settlement price Based on the closing prices (auction) of the index components on the Last Trading Day

at London Stock Exchange (IOB)

Last Trading Day Third Friday of the expiration month at 16:30 CET

Continuous trading 08:00 – 22:00 CET 09:15 – 16:30 CET

EurexOTC Trade Entry 08:00 – 22:00 CET 09:15 – 19:00 CET

EurexOTC

Flexible Contracts

Available

EurexOTC

Minimum block trade size

100 contracts

Vendor codes Reuters: <0#FRDX:>

Bloomberg: <RXDmy Index>

Reuters: <0#ORDX*.EX>

Bloomberg: <RDmyC Y Index>

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EurexOTC Trade Entry services

The EurexOTC1) Trade Entry services enable participants to enter off-exchange trades into the Eurex®

system. With these facilities you can benefit from the flexibility of customized trading and the advantages

of standardized clearing and settlement via Eurex Clearing at the same time.

• Block trades

– Minimum size for RDX® USD futures and options is 100 contracts

• Vola trades

– Simultaneous entry of delta-neutral position of RDX® USD Index futures and options

– Only options leg must meet minimum OTC Block Trade size

• Exchange for physicals (EPI trade, EFPI trade)

• Flexible Contracts

– Flexible Futures

• Maturity2)

– Flexible Options

• Expiration2)

• Strike

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1) OTC = over the counter (off-exchange)

2) Maximum term is defined by the maximum term of the current listed standard contract

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RDX® USD Index

Volume and open interest development

As of 28 February 2013

Source: Eurex Exchange

www.eurexchange.com



10

Product

Infra-

structure

Market

participants

Market

participants

RDX® USD

Index

derivatives

IT Infra-

structure

www.eurexchange.com


Market Maker in RDX® USD index derivatives

Firm Product/contact Telephone Email

BNP Paribas FRDX1):

Geoffray Zanin

BNP Paribas Delta One

Emerging

ORDX1):

BNP Paribas CEEMEA

Dervatives Trading Team

+44-207-595-8559

+44-207-595-8952

[email protected]

[email protected]

[email protected]

Raiffeisen

Centrobank AG

FRDX:

Johannes Hämmerle

+43-1-515-204-39

[email protected]

Citigroup Global

Markets Limited

FRDX:

Anh Tuan Ngyuen

ORDX:

John Lavan

+44-207-986-0742

+44-207-986-9713

[email protected]

[email protected]

VTB Capital plc ORDX:

Matthieu Ressencourt

Nicolas Ewald

+44-203-334-8015

+44-203-334-8017

[email protected]

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1) FRDX = RDX ® USD Index Futures; ORDX = RDX ® USD Index Options

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Trading statistics

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62%

22%

16%

Account structure FRDX

Agent Account Market Maker Account Principal Account

71%

15%

14%

Account structure ORDX

Agent Account Market Maker Account Principal Account


Account structure FRDX Account structure ORDX

www.eurexchange.com


2013-03 53%

2013-06 16%

2013-09 2% 2013-12

20%

2014-06 1%

2014-12 6%

2015-12 2%

FRDX – Traded contracts

Trading analysis

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2013-03 34%

2013-06 20%

2013-09 5%

2013-12 26%

2014-06 3%

2014-12 8%

2015-12 4%

FRDX – Open interest

2013-03 30%

2013-04 1%

2013-05 0%

2013-06 21%

2013-09 3%

2013-12 28% 2014-06

1%

2014-12 9%

2015-12 7%

ORDX – Traded contracts

2013-03 27%

2013-04 2%

2013-05 1%

2013-06 23%

2013-09 3%

2013-12 26% 2014-06

1%

2014-12 10%

2015-12 7%

ORDX – Open interest

FRDX – Traded contracts FRDX – Open interest


www.eurexchange.com



14

Product

Infra-

structure

Market

participants

IT

Infra-

structure

RDX USD

Index

Derivatives

Market

participants

www.eurexchange.com


Eurex Exchange’s network: about 420 Participants from +30 countries

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USA

Ireland

Greece

Belgium

Spain

UK

Germany

Gibraltar

Italy

Portugal

Denmark

Finland

Netherlands

Sweden

Singapore

Australia

Austria

Switzerland

Source: Eurex Exchange, as of March 2012

UAE (Dubai)

Cyprus

Luxembourg

Croatia

France

Czech Republic

Canada

Estonia

China (Hong Kong)

Taiwan

Bermuda

Japan

Poland

Israel

Cayman Islands

Virgin Islands

Easy access to Eurex Group’s infrastructure

from around the world

Host system

Access point

Participant

www.eurexchange.com


Trading infrastructure

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• Eurex Exchange developed a new trading architecture for derivatives trading.

– Migration of derivatives products currently ongoing (several steps).

– Migration is planned to be finished by end of Q2/2013

• Drivers for a new trading infrastructure

– Follow market demand for low latency trading and more flexibility.

– Move from current interfaces landscape to “no-exchange footprint” at participant side.

– Technology refresh of trading infrastructure - internal VMS end of life.

• Advantages for exchange participants

– World-class performance: massively increased system throughput / ultra-low latency.

– Higher system flexibility allowing for a reduced time to market when introducing new functionality

and new financial products.

– Architectural platform changes enable some new functions and functional enhancements, such as

enhanced calendar spreads, user-defined strategies, Market Maker protection for futures, and more.

– Improved user administration and capabilities, and better separation of trading units within

participant organizations.

– Zero footprint of external interfaces decoupling new interface features from backend changes, while

keeping successful interface concepts such as providing GUI solutions.

Eurex Exchange’s new trading architecture

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Clearing infrastructure

• Eurex Clearing is one of the world’s leading clearing houses and an innovator in risk management

offering fully automated and straight-through post-trade services for transactions in the following asset

classes:

– derivatives

– equities

– repos

– energy

– fixed-income securities

• Eurex Clearing acts as a central counterparty for these asset classes:

it becomes a buyer to all sellers and a seller to all buyers, thereby minimizing counterparty risk and

improving operational efficiency.

• Eurex Clearing helps customers to manage trades, risk, collateral and delivery.

• On 27 May 2013, Eurex Clearing plans to introduce its new portfolio based risk management

methodology - Eurex Clearing Prisma.

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www.eurexchange.com


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Benefits are derived through the methodical cornerstones of the next generation risk management model

• Aligned default management process between listed and OTC.

• Positions deemed suitable for simultaneous liquidation are

logically assigned to the same Liquidation Group.

• Risk offsets are only granted within the same Liquidation Group

(e.g. Equity, Commodity or Fixed Income).

Consistency

4

2

3 Central benefits • Adjustments to enable stable margin requirements: concentration,

uncertainty in correlations, model error adjustments if compression

is used.

• Flooring for stability: Stressed period scenarios and dynamic volatility

scaling to at least long run volatility percentiles.

Robustness

• More accurate risk netting effects for listed, and between listed and OTC

positions.

• Higher capital efficiency for customers through risk calculation on

portfolio basis.

Capital efficiency

Reduced time-to-market for new products. Flexibility

1

5

• Cross-product scenarios enable consistent way to account for portfolio

correlation and diversification effects.

• Risk covered at 99% through margin calculation - consisting of a

− Mark-to-market component

− Forward looking component

− Adequate liquidation time horizon

Accuracy

Five central benefits for customers through Eurex Clearing Prisma

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Appendix

19

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Market Making obligations

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RDX® USD Index Futures (FRDX) RDX® USD Index Options (ORDX)

Minimum quote size • 75 contracts

– on the bid and ask side – the two nearest maturities (up to 6 months)

• 75 contracts

– on the bid and ask side – Up to 12 months – Calls and puts for 7 out of 9 strike prices per

expiration and around the current underlying price have to be quoted

– Asymmetric Quotation is allowed, i.e. strike prices chosen for calls and puts need not to be identical

Maximum spread • 1.00% Up to 6 months:

Bid up to (index points):

0 – 40.0 = 8.0

40.1 – 400.0 = 20.0%

> 400.0 = 80.0

Greater 6 months:

Bid up to (index points):

0 – 40.0 = 12.0

40.1 – 400.0 = 30.0%

> 400.0 = 120.0

Quotation period 90 percent of the trading period from 9:15 a.m.

to 4:30 p.m. (CET) on a monthly average

85 percent of the trading period from 9:15 a.m. to 4:30

p.m. (CET) evaluated on a monthly average

Fast market

conditions

• Maximum spreads will be increased by 100% • Minimum quote size will be reduced by 50%

www.eurexchange.com


Roland Schwinn

Eurex Frankfurt AG

50 Raffles Place

No. 21-05 Singapore Land Tower

Singapore 048623

P: +65 6304-52 52

F: +65 6304-52 80

[email protected]

Tobias Ehinger

Deutsche Börse AG / Eurex

UK Representative Office

One Canada Square, Canary Wharf

London, E14 5DR

United Kingdom

P: +44 (0)207 862-72 31

F: +44 (0)207 862-9231

[email protected]

Murat Baygeldi

Deutsche Börse AG / Eurex

UK Representative Office

One Canada Square, Canary Wharf

London, E14 5DR

United Kingdom

P: +44 (0)207 8 62-72 30

F: +44 (0)207 8 62-92 30

[email protected]

Sales Asia & Middle East

Markus-Alexander Flesch

Eurex Zürich AG

Selnaustrasse 30

8021 Zürich

Switzerland

P:+41 (0)58 3 99-29 48

F:+41 (0)58 4 99-24 66

[email protected]

Paul Beck

Deutsche Börse AG

Representative Office France

17, rue de Surène

75008 Paris

France

P: +33 (0)155 2 76-7 72

F: +33 (0)155 2 76-7 50

[email protected]

France Schuster

Eurex Frankfurt AG

Neue Börsenstraße 1

60487 Frankfurt / Main

Germany

P: +49 (0)69 2 11-1 52 38

F: +49 (0)69 2 11-61 52 38

[email protected]

Product Development Sales UK

Further information

Contact us

Sales Frankfurt Sales Paris

Sales Zurich

21

www.eurexchange.com


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© Eurex 2013 Deutsche Börse AG (DBAG), Clearstream Banking AG (Clearstream), Eurex Frankfurt AG, Eurex Clearing AG (Eurex Clearing) as well as Eurex Bonds GmbH (Eurex Bonds) and Eurex Repo GmbH (Eurex Repo) are corporate entities and are registered under German law. Eurex Zürich AG is a corporate entity and is registered under Swiss law. Clearstream Banking S.A. is a corporate entity and is registered under Luxembourg law. U.S. Exchange Holdings, Inc. and International Securities Exchange Holdings, Inc. (ISE) are corporate entities and are registered under U.S. American law. Eurex Frankfurt AG (Eurex) is the administrating and operating institution of Eurex Deutschland. Eurex Deutschland and Eurex Zürich AG are in the following referred to as the “Eurex Exchanges”. 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While reasonable care has been taken in the preparation of this publication to provide details that are accurate and not misleading at the time of publication DBAG, Clearstream, Eurex, Eurex Clearing, Eurex Bonds, Eurex Repo as well as the Eurex Exchanges and their respective servants and agents (a) do not make any representations or warranties regarding the information contained herein, whether express or implied, including without limitation any implied warranty of merchantability or fitness for a particular purpose or any warranty with respect to the accuracy, correctness, quality, completeness or timeliness of such information, and (b) shall not be responsible or liable for any third party’s use of any information contained herein under any circumstances, including, without limitation, in connection with actual trading or otherwise or for any errors or omissions contained in this publication. This publication is published for information purposes only and shall not constitute investment advice respectively does not constitute an offer, solicitation or recommendation to acquire or dispose of any investment or to engage in any other transaction. This publication is not intended for solicitation purposes but only for use as general information. All descriptions, examples and calculations contained in this publication are for illustrative purposes only. Eurex and Eurex Clearing offer services directly to members of the Eurex exchanges respectively to clearing members of Eurex Clearing. Those who desire to trade any products available on the Eurex market or who desire to offer and sell any such products to others or who desire to possess a clearing license of Eurex Clearing in order to participate in the clearing process provided by Eurex Clearing, should consider legal and regulatory requirements of those jurisdictions relevant to them, as well as the risks associated with such products, before doing so. Eurex derivatives (other than EURO STOXX 50® Index Futures contracts, EURO STOXX® Select Dividend 30 Index Futures contracts, STOXX® Europe 50 Index Futures contracts, STOXX® Europe 600 Index Futures contracts, STOXX® Europe Large/Mid/Small 200 Index Futures contracts, EURO STOXX® Banks Futures contracts, STOXX® Europe 600 Banks/Industrial Goods & Services/Insurance/Media/Personal & Household Goods/Travel & Leisure/Utilities Futures contracts, Dow Jones Global Titans 50 IndexSM Futures contracts, DAX® Futures contracts, MDAX® Futures contracts, TecDAX® Futures contracts, SMIM® Futures contracts, SLI Swiss Leader Index® Futures contracts, Eurex inflation/commodity/weather/property and interest rate derivatives) are currently not available for offer, sale or trading in the United States or by United States persons. Trademarks and Service Marks Buxl®, DAX®, DivDAX®, eb.rexx®, Eurex®, Eurex Bonds®, Eurex Repo®, Eurex Strategy WizardSM, Euro GC Pooling®, FDAX®, FWB®, GC Pooling®,,GCPI®, MDAX®, ODAX®, SDAX®, TecDAX®, USD GC Pooling®, VDAX®, VDAX-NEW® and Xetra® are registered trademarks of DBAG. Phelix Base® and Phelix Peak® are registered trademarks of European Energy Exchange AG (EEX). The service marks MSCI Russia and MSCI Japan are the exclusive property of MSCI Barra. RDX® is a registered trademark of Vienna Stock Exchange AG iTraxx® is a registered trademark of International Index Company Limited (IIC) and has been licensed for the use by Eurex. IIC does not approve, endorse or recommend Eurex or iTraxx® Europe 5-year Index Futures, iTraxx® Europe HiVol 5-year Index Futures and iTraxx® Europe Crossover 5-year Index Futures. Eurex is solely responsible for the creation of the Eurex iTraxx® Credit Futures contracts, their trading and market surveillance. ISDA® neither sponsors nor endorses the product’s use. ISDA® is a registered trademark of the International Swaps and Derivatives Association, Inc. IPD UK Annual All Property Index is a registered trademark of Investment Property Databank Ltd. IPD and has been licensed for the use by Eurex for derivatives. SLI®, SMI® and SMIM® are registered trademarks of SIX Swiss Exchange AG. The STOXX® indexes, the data included therein and the trademarks used in the index names are the intellectual property of STOXX Limited and/or its licensors Eurex derivatives based on the STOXX® indexes are in no way sponsored, endorsed, sold or promoted by STOXX and its licensors and neither STOXX nor its licensors shall have any liability with respect thereto. Dow Jones, Dow Jones Global Titans 50 IndexSM and Dow Jones Sector Titans IndexesSM are service marks of Dow Jones & Company, Inc. Dow Jones-UBS Commodity IndexSM and any related sub-indexes are service marks of Dow Jones & Company, Inc. and UBS AG. All derivatives based on these indexes are not sponsored, endorsed, sold or promoted by Dow Jones & Company, Inc. or UBS AG, and neither party makes any representation regarding the advisability of trading or of investing in such products. All references to London Gold and Silver Fixing prices are used with the permission of The London Gold Market Fixing Limited as well as The London Silver Market Fixing Limited, which for the avoidance of doubt has no involvement with and accepts no responsibility whatsoever for the underlying product to which the Fixing prices may be referenced. PCS® and Property Claim Services® are registered trademarks of ISO Services, Inc. Korea Exchange, KRX, KOSPI and KOSPI 200 are registered trademarks of Korea Exchange Inc. BSE and SENSEX are trademarks/service marks of Bombay Stock Exchange (BSE) and all rights accruing from the same, statutory or otherwise, wholly vest with BSE. Any violation of the above would constitute an offence under the laws of India and international treaties governing the same. The names of other companies and third party products may be trademarks or service marks of their respective owners.

trading russian derivatives at eurex · pdf file–secondary listing of russian companies...

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