The inexorable growth of the dividends "futures" market

Dividend Futures give rise to growing interest among market professionals, including fund management companies based in France, as evidenced by the recent launch of strategies specifically dedicated to this market segment, particularly in Melanion Capital or Laffitte Capital Management for instance...

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Moreover, the main organized markets have understood this keen interest, multiplying in recent years, the number of financial instruments available on this topic.

The German derivatives exchange - Eurex - initiated the movement in June 2008 being the first to have launched such a product. Based on the Euro Stoxx 50 index, today it is one of the key instruments of its range of derivatives products on its electronic platform. Indeed, on average, nearly 15,000 contracts are exchanged daily since the beginning of the year.

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The open interest (ie, the number of futures contracts unsettled) Overall exceed 700,000 contracts at the end of last September, corresponding to a nominal value of € 8 billion (see graph below above).).

With this success, Eurex has continued to introduce new instruments on the same concept in recent years, including the creation of dividend futures on individual stocks or sectors but also options like with future dividends being the underlying asset.

Again, for all these new products, the enthusiasm of the players is present. Thus, the average daily volume of transactions recorded in 2013 and the current level of the open interest, amounted respectively to 10 000 and 1 600 000 million contracts for single stock futures,

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5000 and 1 150 000 million contracts for options on dividend futures of Euro Stoxx 50 index for example.

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Proof of the growing interest of stakeholders for these products, the number of underlying available on single stock dividend futures widens year by year. Today, dividend futures on the Swiss and UK equities are now traded and not just the only constituents of the Euro Stoxx 50 index, as originally.

It is now possible to intervene on Europe’s largest market capitalizations, although the majority of traded contracts at the moment involve securities such as Banco Santander, Vodafone, Telefonica, Banco Bilbao Vizcaya Argentaria (BBVA) or Axa, according to recent statistics provided by Eurex.

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In short, many new products that should appeal to operators and continue to increase the number of transactions recorded on this type of product in the future; liquidity often attracting new players in the market.

RF , February 2014

Article also available in : English EN | français FR

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