Eurex to launch Europe’s first derivatives on ETFs

International derivatives exchange Eurex aims to launch Europe’s first futures and options on exchange-traded funds (ETFs) in November.

Eurex said it will be the first exchange worldwide to offer futures on ETFs. It will also be the first in Europe to offer ETF derivatives. Options on ETFs are currently available in the US.

“With derivatives on exchange-traded funds, we are offering the market innovative instruments to fine-tune the risk in this new growth market,” said Rudolph Ferscha, Eurex chief executive. “Derivatives products on ETFs have a high benefit for the customer and they are an ideal complement to our existing index derivatives segment.”

ETFs let investors gain exposure to a sector using a single security. The cash instruments track an index or replicate the performance of a basket of stocks and are traded on an exchange like a regular share.

Deutsche Börse, which along with the Swiss Exchange forms the parent company of Eurex, introduced ETFs as a market segment in April 2000. It now lists 57 index funds and 14 actively managed equity funds."It's effectively our first single-stock future," said Peter Reitz, Eurex board director, at the Swiss Futures and Options Association derivatives meeting held in Bürgenstock, Switzerland. Reitz added that Eurex has no plans to launch single-stock futures, however.

Nasdaq Liffe Markets - a joint single-stock futures venture between US securities exchange Nasdaq and the London International Financial Futures and Options Exchange (Liffe) - is also studying introducing futures and options on ETFs, according to John Foyle, deputy chief executive of Euronext.Liffe.