Euronext is launching cash-settled mini-futures on European government bonds this September, which it says are the first offering of this kind in Europe.
“This is going to give investors way more flexibility than they get with Eurex,” commented Charlotte Alliot, head of financial derivatives at Euronext.
The products are designed for both retail and institutional investors, potentially giving the latter improved granularity for hedging and exposure. Bonds included in the initial launch are France’s OAT, Germany’s Bund, and Spain’s Bono. Italian BTPs are also on offer, in both ten and 30-year iterations.
Alliot noted: “That 30-year BTP product currently doesn’t exist, even in a bigger lot size. We have noticed that the 30-year bond is attracting a lot of volume and trading, more than the 10-year.”
This is the latest in a string of launches from the exchange group following its migration to Euronext Clearing last year and the acquisition of Borsa Italiana.
Alliot said: “That gave us the cash bond markets of MTS and MOT. MTS is more the institutional side, MOT the retail side, and both markets are booming.”
Currently, six retail brokers are expected to engage with the futures from day one. Five market makers are also confirmed partners, with Alliot adding that conversations with others are ongoing. Names are not currently being disclosed.
Moving into fixed income is a tenet of Euronext’s Innovate for Growth Strategic Plan, which includes a number of projects to boost the group’s footprint by 2027.
Alliot commented: “This will be the first step of our strategy on fixed income derivatives. We intend to be a strong participant in this market.”
Retail is an increasingly important part of the market, and is something that Euronext is keen to break into in the fixed income space.
“We believe that we are in the best position to do that,” Alliot continued. “We are an aggregation of local exchanges. We’ve acted for years linking with retail brokers, and on the equity derivative side we are investing a lot into the retail space.”
The new products will list on Euronext Milan.
“In Italy, institutional and retail investors are keen on fixed income. Retail investors are very sophisticated. So it was a natural move to offer mini futures in the retail size,” Alliot explained.
However, she continued, this is a pan-European move. “We’re speaking to asset managers everywhere in Europe.”
Anthony Attia, global head of derivatives and post trade at Euronext, added: “By entering this critical market segment, we respond to the needs of investors who seek diversified opportunities and competitive solutions. This is a significant step forward in our strategy to expand our derivatives franchise, realising our vision of driving growth and efficiency across Europe’s financial ecosystem.”
Fee schedules for the mini-futures are currently being tested with clients, but Alliot affirmed that charges will not increase compared to standard size products.
“We intend to do something fair. It’s a matter of respect for the trading community, which is helping us build the contracts,” she said.
On that theme, incentive programmes for market makers will remain once liquidity has been attracted.
“We are having workshops with the market makers to finalise the obligations and schemes,” she said. “We know that it’s good not to remove the incentives for them – we want them as long-term partners. We are very aware that we are a challenger. It’s always been important for us to treat clients in a fair way. You cannot mistreat someone on one product and ask for help on some other one.”
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