Digital Derivatives Forum

Derivatives markets after the Covid-19 crisis

Covid-19 has been a real-life stress test for the derivatives industry. The spread of the virus is a black swan event that the industry performed well throughout despite the substantial challenges in terms of record volumes and volatile markets.

This whitepaper features analyses of the discussions that were held at the inaugural Digital Derivatives Forum, which Eurex hosted on the 10 June. The fact that it was held as a virtual event rather than in person represents how innovation has been the solution to the challenges posed by the Covid-19 virus. 

Indeed, innovation and adaptation was a key theme throughout the panels and in this whitepaper. The industry rose to the challenges posed by the virus, dealing with record volumes as it shifted operations to a home environment and has learned lessons that will drive innovation and resilience for years to come. 

Thomas Book, CEO, Eurex

White Paper

Clearing & Margining

A look at how the COVID-19 pandemic and related market volatility has impacted clearing and margin management and how industry participants are changing their operations and procedures accordingly.

  • How has the CCP risk model management been affected by COVID19?
  • What impact has the recent volatility had on margin management and funding?
  • How is the recent crisis changing firms’ approach to clearing?

Responsible Investing

The current portfolio shift from existing benchmarks to sustainable alternatives will continue to change the investment landscape as more than 70% of institutional investors stated that all their portfolios will be managed according to responsible investment principles by 2030. This shift poses some fundamental questions though.

  • What constitutes irresponsible behaviour by investors?
  • Calculating ESG indices: does the concept of an index undermine the ESG movement?
  • Fixed income ESG: what are the implications of expanding ESG beyond equities?

Equity derivatives volatility

The spread of the coronavirus has led to unprecedented volatility and volume across global derivatives markets. At the same time, operations have been tested like never before. As the first wave of the crisis abates, thoughts are now turning to what lessons have been learned and what will permanently change as a result of the recent experience.

  • Where was the major pressure on operations stemming from the volatility and volumes?
  • How has the crisis changed our understanding of volatility trading?
  • Volatility and risk management of the options market: what lessons have been learned over the past two months?

Total return futures 

The current market volatility has introduced uncertainty around dividends and is driving firms to look at ‘dividend neutral’ solutions, such as the Eurex Total Return Futures (TRFs), to support their trading needs. Stuart Heath, Director, Equity & Index Product Design at Eurex and Julia Schieffer, Founder of DerivSource, explore in a Q&A discussion.

  • How is the dividend equity market impacted by current market volatility and changing dividend expectations and what are the new challenges firms face?
  • How do TRFs fit into newly adapted trading strategies in light of new market conditions
  • What’s next for TRFs and how will Eurex continue to evolve this instrument to support new needs?