Eurex Significantly Expands Commodity Derivatives

Ruzan Haruriunyan's picture

Eurex, the international derivatives exchange, today announced that it will extend its product offering, with new futures and options based on commodity underlyings in Q1 2009. As a first step, it will launch futures and options on gold on 2 February. The US dollar denominated contracts will be based on the benchmark gold fixing of the London Bullion Market, referenced to the largest gold spot market in the world.

Further, Eurex signed a license agreement for the use of the Dow Jones-AIG Commodity Index family. Eurex aims to list the first products in the first quarter of 2009.

Peter Reitz, member of the Eurex Executive board, said “With this expansion, we significantly increase our product offering in the commodities area. This is another milestone in our strategy to offer our customers multi-asset class products on a global scale. Our gold contracts will complement the existing OTC market, adding transparency and central clearing to the existing OTC market.”

With its gold contract, Eurex especially aims to offer access to clients in Europe that prefer or require a cash settled contract. Only a small percentage of forward transactions actually result in physical delivery, therefore Eurex’s cash settled contracts can accommodate both physical and financial market participant’s requirements. Market makers will ensure a liquid order book from the launch date. The exchange also adds value to the OTC gold market through its clearing facilities which allow bi-lateral negotiation of trades combined with straight-through processing on a single platform and central clearing, thereby mitigating counterparty risk. To attract OTC flow, the new products will have a block trade size of one contract and can be cleared via the Eurex Clearing OTC facility.

The Dow Jones-AIG Commodity Index family is one of the leading commodity index families in terms of assets under management linked to it. By offering cash settled futures and options on the Dow Jones-AIG composite index and on some of the sector indices, Eurex will be the first European exchange to enable trading in commodity index derivatives. These products will also offer the benefits of central counterparty to a segment, which is to a large extent currently based on OTC index swaps.

Both new product initiatives will complement the existing emissions trading product suite available at Eurex. Since December 2007, Eurex in cooperation with EEX has been offering futures and options on EUA as well as futures on CER. Volumes have been steadily growing since then. --

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