VIDEO | The conversation wasn’t going to be heavy on crypto, but as moderator Robert Bernstone pointed out, it would be remiss not to at least touch upon the subject in a session titled “Emerging asset classes at the clearinghouses – and what clients’ needs are driving the demand”. Those present at the panel at the PostTrade 360° Nordic 2024 conference got treated to a well-rounded discussion – on crypto, as well as more conventional products.
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Embrace it
Crypto “is here, and is here to stay”, conceded Davide Masi, fixed income and currencies product manager at Eurex. At Eurex Exchange, Bitcoin index futures and options were launched in 2023, followed by its Ethereum counterpart in August this year – both, according to Masi, driven by client demand.
“Crypto derivatives and in particular, Ethereum futures and options were one of the products that started to trade on day one as soon as they were launched and build open position and open interest,” he noted. “There was definitely demand and interest from end customers to have an opportunity to trade and clear cryptocurrency exposure via a regulated market and institutions that have been established for over 20 years.”
Take it slow
The take up of crypto assets at Cboe Clear doesn’t appear to be going as quickly as at Eurex. The CCP currently does not have a licence for crypto products in the EU. Lennart Visser, the firm’s sales relationship manager admitted that some clients have been “asking for it”, but that volumes are low, and the demand is coming from “mostly market makers”.
The story is slightly different for Cboe Clear’s US branch, which does have the licence to clear Bitcoin and Ethereum. Nevertheless “the volumes are not big”, revealed Visser. Should the firm ever decide to foray into crypto, it would likely be crypto exchange traded products (ETPs), in consideration of Cboe Clear’s origins as an equity-only CCP.
Traditionalists have a place
Besides crypto, the panel mentioned a number of emerging assets that are more conventional. One of which was credit index futures at Eurex, launched in 2021.
“With credit index futures, you are able to, on one hand, use a standardised listed product to get exposure to the credit market, while on the other hand, reduce drastically the cost of cearling such a product,” explained Masi. This gives access to a market that is “highly diversified” in the demographic of clients that are utilising the product, giving the ability to “build on the futurisation and electronisation trend that has been developing in the financial markets, especially on the fixed income side, over the past few years”.
Credit index futures have similarities to a credit default swap (CDS) index, but is a future on a corporate bond index. It is preferred by clients who want “a mix of interest rate risk and credit risk”. The product also offers “for the first time”, the chance to “take leveraged exposure, not on an index made of CDSs, but on an index made of actual corporate bonds that is broadly representative of their market of references.”
For Eurex, credit index futures is “a more reliable way of hedging and protecting the corporate bond portfolios against downturns of the economy” and “a potential way to invest in an asset class where it was previously more difficult to get leverage exposure”.
Panelists:
Lennart Visser, Relationship Manager Sales, Cboe Clear
Davide Masi, Fixed Income and Currencies Product Manager, Eurex
Moderator:
Robert Bernstone, Head of Client Clearing, Swedbank
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