Eurostoxx dividend futures see trading frenzy

More than two million Eurostoxx 50 index dividend futures have changed hands in March to date, almost double the previous monthly record, as traders react to the shutdown of the eurozone economy due to the spreading coronavirus.

Data from Eurex Exchange shows turnover of 2,078,776 for its flagship index dividend product to March 25 – almost twice the 1,099,812 posted for the whole of February and the previous record of 1,236,421 in October 2018.

 

March 17 saw the highest daily traded volume this month to date, when 147,497 contracts changed hands. Activity has focused on the December 2021 and 2020 expiry.

Eurostoxx 50 index futures have also seen elevated volumes this month. March 17 saw 7,298,504 contracts exchanged.

 

What is it?

The Eurostoxx 50 index dividend future is an exchange-traded contract that allows investors to speculate on future dividend payments by constituents of the Eurostoxx 50 index.

Why it matters

Index dividend future prices fell 39% to 74 index points over the last 20 days, as the Eurostoxx nosedived and companies signalled that dividends would be cut in the coming months because of the economic fallout of the coronavirus pandemic.

Structured product dealers may have been behind a good chunk of the trading activity in recent days. To hedge their issuances they must sell dividend futures – more so as the underlying equity index falls.

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• Topics
• Dividends
• Equity derivatives
• Equity index futures
• Eurex Exchange
• Europe
• Euro Stoxx 50
• Futures
• Risk Quantum
• CCPs