UPDATE: NYSE Euronext Taps MSCI For New Stock Index Futures
May 26 2009 - 12:28PM
Dow Jones News
NYSE Euronext (NYX) announced plans Tuesday to launch a new
range of equity index futures likely to intensify competition among
global derivatives exchanges.
The contracts based on MSCI Inc. (MXB) indexes are the first
self-developed products for the exchange operator's small U.S.
derivatives platform, which was launched last year with metals
futures acquired from CME Group Inc. (CME).
The push into domestic and international equity index futures
will take NYSE Euronext head-to-head with its main rivals in a
market that has proven more resilient than traditional
interest-rate futures.
Expanding the U.S. derivatives business was a key part of the
2007 merger between NYSE Group and Euronext, balancing slower
growth and lower-margin equities operations on both sides of the
Atlantic.
Tom Callahan, head of the NYSE Liffe U.S. platform, said its
partnership with MSCI covers 44 indexes, and renewal of the
contract will depend in part on trading volume.
Competition among exchanges for index licenses has been fierce
at times as operators stake out ground that has become more
valuable amid the slump in interest-rate products.
Callahan said there was acute interest in MSCI benchmark
products, particularly among U.S.-based algorithmic traders.
"In terms of [assets under management], MSCI has about one-third
of the U.S. cash ETF market, so there's proven trading demand in
cash form," he said in an interview.
Volatility in the cash equity markets has driven higher volume
in index-linked contracts on both sides of the Atlantic.
"In equity indices, volumes are strong, interest is high and we
expect that to remain for the foreseeable future," added
Callahan.
The new NYSE Liffe U.S futures will link to MSCI's benchmarks
for U.S. and European equity markets, as well as indexes tracking
Brazil, Russia, India, China and emerging markets.
London-based NYSE Liffe already trades futures on the FTSE and
AEX indexes, while Eurex, the derivatives arm of Deutsche Boerse AG
(DB1.XE), has the Dow Jones STOXX indexes of European equities and
the DAX German blue chip index.
CME trades products based on the S&P and Dow Jones
Industrial Average indexes; the Chicago-based exchange company used
to maintain markets in the Russell 2000 family of indexes until
IntercontinentalExchange Inc. (ICE) took over the license and
transferred the products to its platform last fall.
Callahan said partnering with MSCI is a "natural extension" of
NYSE Euronext's existing relationship with the index provider,
which includes exchange-traded funds and options based on MSCI
indexes.
The exchange is working with the Options Clearing Corp., which
clears trades on NYSE Liffe US, to develop cross-margining
capabilities that will make it cheaper to trade across the product
group.
NYSE Liffe US will also extend an incentive program, introduced
in April to tie its precious metals futures to similar ETFs, to
cover the new MSCI index futures.
Callahan said that program hasn't yet translated to higher
volumes in the existing gold and silver derivatives, as
participants work through a regulatory process to access the
incentives.
-By Jacob Bunge, Dow Jones Newswires; (312) 750 4117;
jacob.bunge@dowjones.com