Eurex is expanding the field of Total Return Funds (TRFs) by partnering with MSCI, a leading provider of key decision-making tools and services to the global investment community.
From 11 March 2024, Deutsche Börse Group’s derivatives arm plans to launch TRF contracts on three MSCI indices: MSCI World Index, MSCI EAFE Index and MSCI Emerging Markets Index. The launch reflects Eurex’s commitment to providing innovative solutions that support the global shift from exchange-traded to listed and centrally cleared derivatives.
The new TRFs will mark a further milestone in Eurex’s TRF success story, as for the first time TRFs are offered on global indices, which are increasingly in demand by market participants. The new contracts will cover the net return versions of the following indices: MSCI World Index (TMWO), MSCI EAFE Index (TMFA) and MSCI EM Index (TMEM). TRFs will be denominated in USD.
The underlying reference rate in the US is the SOFR (Secured Overnight Funding Rate). For technical reasons, they will initially be available during US trading hours (14:30 – 22:00 CET, 08:30 AM ET – 04:00 PM ET). Expansion to European morning and Asian sessions is planned later in 2024.
Randolf Roth, member of the Eurex Executive Board, commented:
“Eurex reinforces its commitment and continues to lead in providing innovative solutions that meet increased capital requirements, delivering significant capital returns to our sell-side and buy-side clients. We are delighted to partner with MSCI to further strengthen and expand TRF’s success story.”
George Harrington, CEO of MSCI, added:
“We are delighted to be working with Eurex as they expand their TRF segment to include MSCI Indices. This reflects the growing demand for cleared and listed TRFs on global benchmarks, offering improved capital returns to market participants.”
The goal of TRFs is to replicate the returns of traditional bilateral stock trading or stock index-based exchanges. However, compared to exchanges, central clearing allows for portfolio margining, simplifies settlement and mitigates counterparty risk.
The new TRF contracts complement Eurex’s existing TRF suite, which includes benchmark TRFs, individual stock TRFs and Basket TRFs. Eurex is the world’s leading marketplace with the widest TRF offering and the largest pool of open interest.
Eurex launched the TRF segment in 2016 with the introduction of the first Total Return ETFs on the EURO STOXX 50 Index. In October 2019, euro-denominated equity futures with more than 250 underlyings and the new basket trading function followed. FTSE 100 indexed TRFs and additional GBP shares in 73 stocks are available from March 2021 and 20 November respectively.
Since its launch, Eurex has managed to transfer most of the EURO STOXX 50 OTC exchange market to its product. Current open interest in TRF on Eurex stands at more than 3 million contracts or €125 billion in notional terms.