February was a busy month for new product launches at Eurex and especially our innovative ESG derivatives segment was off to a promising start. The open interest in the STOXX® Europe 600 ESG-X in particular is building up nicely. The underlying index applies a light exclusion methodology and we expected it to be in demand. While the ESG derivatives took the limelight, we also introduced the STOXX® Europe Select 50 index futures and options. This is an index frequently referenced in structured products, as the combination of low volatility and high dividend yield factors leave the respective long-dated call options relatively low cost. Here we have already seen early block option volume activity. ETF options were also in focus. In February we added new listings covering the top five in-demand US sector products, Brazil, FTSE EPRA and FTSE 250. We are expanding this segment in response to the continued excellent volume trend on the iShares physical gold ETC option. Another 200k contracts traded in February, mainly concentrated in the June put contracts in the 25 to 25.75 strike range.
Equity markets across the globe have seen a particularly bullish performance when adding the February gains to those experienced in January. The run-up was mainly driven by the Fed's U-turn on the progression of interest rate hikes. Sentiment however, given the speed of the market rally in only the first two months of the year, remains cautious. We primarily see this evidenced in our MSCI options and specifically the strong volume growth in the main benchmarks of MSCI World, EM and EAFE.
Finally, looking at our more established products, there were large volume increases in our Total Return Futures. Here Eurex welcomed additional members quoting and trading on behalf of clients. Towards the end of the month, there was an unusually large print in our VSTOXX options. The strategy executed appears to be a purchase of a May 24 / 27 call spread funded through the sale of May 15 / 13 put spread. In order to achieve a zero premium, there was a ratio executed of 185k call spreads vs. 92.5k put spreads. One possible explanation and motive may be speculative positioning ahead of an anticipated delay to the Brexit deadline, factored with the European Parliament elections. Staying on events occurring in May: Eurex announced the planned EnLight extension, our selective RFQ service, to all equity and index options. We anticipate that members will be keen to utilize this service, building on the successes seen in the Swiss market where a trial has seen positive volume development. To ensure a smooth rollout, the Eurex team is ready to respond to any member inquiries.
Zubin Ramdarshan, Head of Equity & Index Product Design, Eurex
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