New option products offer investors an alternative low cost way of investing in broad indices
Amsterdam – 13 January 2015– Euronext, the leading exchange in the Eurozone, today announced the launch of options on six iShares ETFs on its highly successful and innovative Amsterdam derivatives market. The new option products will provide investors with enhanced investment opportunities in ETFs tracking a broad range of macro themes. The options on ETFs are developed and launched as a result of strong market demand. Participants in the launch are iShares (the ETF unit of Blackrock) global quantitative trading firm Susquehanna that acts as liquidity providerand asset manager Theodoor Gillissen.
Since their introduction to the financial markets, ETFs have experienced substantial growth in the US and more recently also in Europe. A recent change in regulation in the Netherlands, the abolition of distribution fees, has increased interest in ETFs and leading to an extremely healthy environment for these products. Over the last year, trading in ETFs on Euronext Amsterdam increased by 40% and the assets under management of Dutch domiciled ETFs listed on Euronext have more than doubled¹.As the ETF franchise expands, investors are looking for complementary products and this launch responds to that demand, offering them the opportunity to use different trading strategies, giving investors domestic access to trading global benchmarks through exposure to an ETF underlying.
Options on ETFs provide institutional and retail investors with an alternative way of investing in broad indices using an option trading vehicle. They operate like individual equity options providing the same risk management and portfolio opportunities and combine the diversification benefits of ETFs with the flexibility of options².
The first ETF options contracts will be launched on iShares MSCI Emerging Markets UCITS ETF, iShares EURO STOXX 50 UCITS ETF, iShares MSCI Europe UCITS ETF,iSharesS&P 500 UCITS ETF, iShares MSCI World UCITS ETF and iShares MSCI Japan EUR Hedged UCITS ETF.
Adam Rose, Head of Financial Derivatives at Euronext, said: “This is yet another example of how we are building out our equity derivatives footprint. The Dutch market is an ideal environment for this launch as it already has a very well developed options market and a sophisticated retail and institutional investor base. We are bringing them the opportunity to invest, through options on ETFs, in a far broader range of macro themes at a fraction of the cost. We are looking forward to developing the market in these new products together with our customers.”
Kirst Kuipers, Head of iShares at BlackRock in the Benelux comments: “BlackRock is excited about this launch, which will offer ETF investors additional tools for managing their portfolios. We are pleased that Euronext has chosen iShares ETFs as the underlying products for these options contracts, and further underscores the quality, transparency and liquidity of these products as best-in-class for European investors.”
Arie Bakker, Trading Manager at Theodoor Gillissen, added: “For a few years we’ve seen an extensively increase of interest in ETFs in general. As a result our clients, used working with derivatives, were asking for derivatives on ETFs. Together with our clients, asset manager Van Lieshout & Partners in particular, we asked Euronext to introduce these new instruments. We are very pleased these products are now available for trading providing our customers with the possibilities to even more effectively manage their ETF portfolios.”
Cathal Hardiman, Sales Trader at Susquehanna International Securities stated: “As a leading market maker in both the ETF and Options space both here in Europe and in the US, Susquehanna is excited to be on board as a designated market maker for this new product listing. ETF options have a lot of growth potential; 5 of the top 10 most actively traded options in the US are options on ETFs³. We will be publishing consistent two-way prices to the screens in order to inject liquidity and promote trading. We are also happy to provide prices to institutional clients who wish to contact us directly, crossing on exchange.”
Notes to Editors:
- The AUM of all Dutch domiciled ETFs was EUR 1.42Bn by end Nov 2014 vs. EUR 654.61M end Nov 2013.
- When compared to index options, options on ETFs provide for lower minimum investments, as well as physical delivery of the underlying asset if the option is exercised. The main difference between ETF options and index options is that ETF options are” American” style which mean they can be exercised at any time prior to expiration and are settled in shares of the underlying security, whereas index options are “European” style options and settle in cash.
- Source: OCC estimates