ABN AMRO Clearing will be offering EURO STOXX 50 Variance Futures contracts on Eurex exchange as of 27 May.
The new contracts are designed to emulate the payoff profile of over-the-counter (OTC) variance swaps, and offer more exposure to the difference between implied-versus-realised volatility.
They will allow users to expand their equity portfolio hedging strategies, allowing hedging to take place in a centralised order book and thereby offering more transparency on pricing.
A migration from OTC trading to order book trading is in line with the G20 Pittsburgh declaration of 2009, and comes as part of a move towards more standardised trading on platforms. Order book trading is considered to be more transparent and generally more accessible.
Specifically, the new Variance Futures are geared towards the needs of alternative investment fund managers.
Barry Polak, head of products at ABN AMRO Clearing, said: “Our principal trading group clients will be able to use the Variance Future as a hedge for options on the EURO STOXX 50 Index and also provide additional market making and arbitrage opportunities.”
“This will complement the suite of exchange traded and OTC cleared products on which clients can benefit from risk offset and margin netting.”
Mehtap Dinc, member of the executive board at Eurex, added: “We are very excited to have ABN AMRO Clearing on board as a clearing member for this new Variance Futures contract”
He said: “Opening up this offering to the traditional ABN AMRO Clearing client base of principal trading groups is of major importance for the success of a new market initiative like this.”
