What is the Eurex Exchange?
The Eurex Exchange is the largest European futures and options market. It primarily deals in Europe-based derivatives. A wide range of trade on this exchange is carried out, from European stocks to debt instruments of Germany. Products are also traded over the counter and it facilitates settling of contracts along with facilitating trade.
Eurex Clearing, a central counterparty for multi-asset class clearing, enables the clearing of transactions of exchange-traded products. It is a fully electronic market and is considered one of the best and most innovative trading exchanges in the world. Headquartered in Germany, the exchange is run by Deutsche Börse AG and SWX Group.
History of the Eurex Exchange
The Eurex exchange arose as European trading witnessed a shift in power in the 1990s as the London Financial Futures Exchange or LIFFE started to gradually lose its dominance to the Frankfurt-based Deutsche Terminbörse (DTB) in the trading of German Government bonds futures. The DTB, one of the first electronic exchanges of the world, initiated merger proceedings with the SOFFEX (the Swiss Options and Financial Futures Exchange). Cooperation between DTB and SOFFEX for close to a decade paved the way for the creation of the Eurex in 1988. In January 2012, Deutsche Börse acquired shares in Eurex Zurich AG from SIX Group AG. The Eurex now operates nine representative offices worldwide: Chicago, London, Paris, Tokyo, Hong Kong, Singapore, Leipzig, Eschborn, Zurich, and Frankfurt (headquarters).
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. Gradually, traditional open outcry trading methods became obsolete. Open outcry or pit trading lost its place to the fully electronic format brought in by the Eurex. Through this electronic mode, buyers and sellers from far and near and from remote areas were brought together and networked through an electronic trading platform. The T7 trading architecture that is used today by the Eurex was launched in 2013 and was originally developed by the Deutsche Group. More than 7,700 traders across as many as 35 countries trade more than seven million contracts every day on this robust and reliable trading network.
Eurex Trading Products
The product range of Eurex comprises nine asset classes:
1. Interest-rate Derivatives
- Fixed Income
- Money Market
- Interest Rate Swaps
2. Equity Index Derivatives
- Derivatives of 12 Index families with benchmarks like EURO STOXX, DAX, MSCI, CSPI, etc.
3. Equity Derivatives
- More than 1000 futures and more than 700 options in 19 countries.
4. Volatility Derivatives
- VSTOXX, Variance Futures.
5. Dividend Derivatives
- Single Stocks, Indexes.
6. FX Derivatives
- Rolling spot futures, classic FX futures and options.
7. Commodity Derivatives
- Bloomberg Commodity Indexes, Exchange-traded commodities.
8. Property Derivatives
- IPD UK Quarterly Index Futures.
9. Exchange Traded Funds Derivatives
- DB x-trackers, i-Shares, Lyxor, Source.
Subsidiaries and Clearing
The Eurex’s five subsidiary companies are the Eurex Exchange, EEX, Eurex Clearing, Eurex Bonds, and Eurex Repo.
- Eurex Exchange: Deals in global derivatives exchange trading. It is the most liquid, euro-denominated equity index and fixed income derivatives exchange.
- EEX: It is an energy exchange in Europe. It operates in spot and futures trading in natural gas, power, emission allowances and coal.
- Eurex Clearing: It is the exchange’s central counterparty for derivatives transactions executed on the Eurex platform, and for equities, bonds, and repo transactions executed on other platforms.
- Eurex Bonds: It is 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.
- Eurex Repo: It is an electronic over the counter marketplace. It is based on an internet platform for international repurchase agreements.
Eurex screens are currently installed in 19 countries and among 389 participants and run on the T7 platform, which was launched in 2013. The exchange offers financial futures contracts based on interest rates, equity indexes, equities, and volatility. It is known for Euro-Bund futures, which was ranked the fifth largest interest rate derivative contract in 2016. Its EURO STOXX 50 futures and options were the fourth and seventh largest equity index derivative contracts by volume, respectively. In July 2014, the exchange started using the branded C7 clearing architecture, which supports both listed and over-the-counter derivatives. It complies with the new derivatives regulation under the European Market Infrastructure Regulation. Among the global derivatives exchanges, Eurex ranked fifth in 2016, according to volume.