Equity & Basket Total Return Futures

A futurized solution for equity financing 

Equity Total Return Futures (ETRF) are part of the Total Return Futures (TRF) portfolio and build on the functionality of EURO STOXX 50®. ETRFs are designed to replicate the payoff of an equity swap based on the underlying shares of a company included in an eligible index. ETRFs are meant to be the basic building blocks for a customized Basket Trades of Equity Total Return Futures (BTRF). This package trade can consist of one or multiple ETRFs.

Benefit from standardization

The standardization of ETRFs and BTRFs leads to better risk management, improved capital efficiency and security when trading total return exposures on an equity benchmark like EURO STOXX 50®.


Key Benefits

  • ETRFs are fully fungible and build on the product structure of the EURO STOXX 50® Index TRF
  • Mitigates counterparty risk and bilateral margining for noncleared OTC equity & basket TRS
  • Cross margining offsets with other equity and equity index derivatives within PRISMA
  • Balance sheet benefits under a transparent and secure CCP environment


Equity Total Return Futures

The building block for baskets

ETRFs are fully fungible contracts aiming to replicate the performance of an OTC equity total return swap (TRS). ETRFs represent the theoretical borrowing of cash to purchase the underlying equity at trade date, assuming it’s held till expiry, i.e., there is immediate exposure to the cash leg of the underlying equity. The holder of a long position will therefore receive the returns associated with holding the cash equity – against which they will pay the financing associated with this purchase. The cost of financing is comprised of the overnight funding rate and the determined traded "spread". This traded spread represents the additional rate, over the overnight benchmark funding rate, required by the seller to provide the returns of the cash equity until expiry.


Basket Total Return Futures

The customized package

BTRFs are a package of multiple Equity TRFs constructed by traders within certain parameters concerning eligible equity shares. This negotiated and customized package of one or more ETRFs is traded with the same maturity and at the same TRF spread. Basket Trades at Eurex Exchange are incorporated within T7 Release 7.1.


How BTRFs work

  • Trading via the T7 trading system
    BTRFs can only be traded via the T7 trading system as block trades.
  • New dedicated screen in the T7 GUI
    The ETRFs components of a basket are entered as a package via a new dedicated screen in the T7 GUI or new dedicated requests via the ETI interface.
  • Same maturity and traded TRF spread
    All ETRFs must have the same maturity (expiry), same market side (buy or sell), same trade type (TAC or TAM) and same traded TRF spread in basis points upon initial execution.


Videos

What is a Total Return Future and what are its key features?

Regulatory changes are driving OTC business to listed solutions. The Eurex Total Return Future (TRF) on the EURO STOXX 50® index is a prime example of this futurization process. In this video, we explain the concept of Total Return Futures and its key features. The overnight funding rate is currently based on €STR + 0.085%. A full switch to just €STR is expected in the course of 2020.

How does the interaction with the market work?

Total Return Futures enable investors to trade the implied repo rate on the EURO STOXX 50® index. In this video, we explain how this calculation of implied repo works in TRFs.

Contacts

Sales

Nicolas von Kageneck

T +33 1 55276-7 76

nicolas.von.kageneck@deutsche-boerse.com

Marketing

Cora Meinecke

T +49 69 211-1 34

cora.alexandra.meinecke@eurex.com

Equity & Index Product Design

Stuart Heath

T +44 207 8 62-72 53

Equity & Index Product Design

Elena Marchidann

T +44 207 8 62-72 65

elena.marchidann@eurex.com