EURO STOXX 50 Corporate Bond Index

Transcription

1 EURO STOXX 50 Corporate Bond Index The STOXX Index and launch of Eurex futures April 2018

2 Agenda Introduction EURO STOXX 50 Corporate Bond Index Corporate Bond Index Futures (FCBI) - Contract Specifications Trading Opportunities Wholesale Offering Appendices 2

3 Introduction The European Fixed Income Markets are in a state of fundamental change with investment banks and asset managers restructuring their businesses to meet new regulatory requirements. Furthermore buy-side firms investment approach is undergoing structural changes as passive products such as exchange-traded funds (ETFs) are gaining momentum. Along with an extraordinary monetary policy, these changes are creating a need for alternative instruments for hedging and portfolio management in the European Corporate Bond Market. In 2016, STOXX launched the EURO STOXX 50 Corporate Bond index based on the well established and widely known European benchmark EURO STOXX 50 Index On September 19, 2017 Eurex launched Futures on EURO STOXX 50 Corporate Bond Index. The Corporate Bond Index Future is a cash-settled index futures with a quarterly expiry and the unique advantages of an exchange traded, straight-through processed and centrally cleared product. As it has the structure of a standard Eurex index future, the new product can be easily added to existing infrastructure. With the EURO STOXX 50 Corporate Bond Index Futures, Eurex provides buy- and sell-side with a versatile hedging instrument to manage their credit risk exposure and replicates some of the exposure within their core Eurozone portfolios. 3

4 European fixed income assets under management are constantly growing with increasing corporate bonds market share Number of ETFs and AUM by asset class Outlook for success Globally bond ETFs developed from $6bn AUM in 2003 to over 900 bond ETFs with over $700bn AUM in The recent strong inflows into bond ETFs come after the asset class emerged as the top-seller in 2016, with European-listed bond ETFs drawing in a net 19.1bn over 12 months. Corporate bond ETFs are the biggest driver of growth and increasing trading volumes, despite sluggish growth in OTC bond liquidity. Bond ETFs are still a fraction of the underlying bond markets; HY ETFs make up just 2.4% of HY debt, IG ETFs make up just 1.8% of the IG market. Fixed Income ETF market share is still very low compared to the level of equity ETF share. 4

5 EURO STOXX 50 Corporate Bond Index Methodology Index Methodology: Underlying bond universe Bond selection criteria Corporate bonds from companies 1) that are constituents of EURO STOXX 50 index at the time of the rebalancing Issuer Type: Corporate bonds, denominated in EUR Bond Type: Fixed and zero-coupon bonds Rating: Investment Grade (consolidated rating BBB or higher) Time to maturity: At least 15 months measured from the respective re-balancing date Amount outstanding: Minimum EUR 750 mn Calculation methodology Index types and data sources Formulas according to the international accepted EFFAS principles of fixed income indices Index weights calculated according to market cap of selected bonds, capped per issuer (20%) and industry sector (40%) Calculated every minute in real-time, between 9:00am and 5:15pm Frankfurt time (GMT+1) 2) Index types: Price Index, Total Return Index, main hedged and unhedged currency versions 3) Pricing source: Continuous evaluated prices from Interactive Data Corporation (IDC) Rating sources: Standard & Poor s and Moody s Reference data sources: IDC and Bloomberg Review Index composition and weights are reviewed quarterly 1) Bond issuers are companies and their subsidiaries, which belong to the corporate group. Subordinated debt is excluded 2) Closing expected at around 7:45 pm Frankfurt time (GMT+1) 3) EUR, USD, GBP, JPY and CHF currencies covered; Source currency exchange rates: WM/Reuters 5

6 272 constituents from 30 issuing companies currently qualify for the index Overview Number of bonds within maturity bucket Top holdings 1) Rank Issuer Number of bonds Weight Banco Santander % 2 BNP Paribas SA % 3 Anheuser-Busch Inbev SA % 4 Volkswagen AG % 5 Daimler AG % 6 Bayerische Motoren Werke AG % 60 7 Telefonica AG % 8 Deutsche Bank AG % 9 Bco Bilbao Vizcaya Argentaria SA % Societe Generale % Unibail Rodamco SE % ) Data as of Apr. 03, Weightings based on capped market capitalization 6

7 The index offers diversified geographical, rating and industry sector allocation 6.6% 10.5% 21.3% 10.3% 44.2% 4.6% Geographical allocation 5.4% 26.1% 30.8% Rating allocation 40.1% Germany France Spain Italy Belgium Others BBB A AA AAA 8.2% 7.9% 11.8% Industry sector allocation 4.8% 1.7% Financials 40.0% Consumer Goods Telecommunications Oil & Gas Utilities Industrials Others 25.5% Weighted Average Bid Yield to Maturity Weighted Average Bid Duration Weighted Average Bid Modified Duration Weighted Average Bid Convexity Weighted Average Remaining Time to Maturity Weighted Average Coupon ) Data as of Apr. 03, Weightings based on capped market capitalization 7

8 Launch of Futures on EURO STOXX 50 Corporate Bond Index Rationale for Launch The European market for corporate bonds plays a key role in the financial ecosystem. It has grown consistently after the financial crisis, both in terms of market participants, with banks now issuing their own ETFs, as well as overall assets under management. In 2016, STOXX launched the EURO STOXX 50 Corporate Bond index based on the well established and widely known European benchmark EURO STOXX 50 Index With the introduction of Futures on EURO STOXX 50 Corporate Bond Eurex is the first mover that offers an exchange traded solution for the corporate bond segment in Europe, with the further option to extend the product offering to other bond indices Eurex opens up a complete new asset class offering a complementary hedging tool along Eurex existing offering to its global customer based Key factors of the futures product Specifications: Cash settled index futures with a quarterly expiry on the 3rd Friday of the cycle March/June/September/December on the EURO STOXX 50 Corporate Bond index (EUR, Price) Contract value EUR 1000 per index point in price quotation; with the tick size of 0.01 and the tick value of EUR 10 it has a notional amount comparable to Eurex Fixed Income Advantages of the futures: Standardized exchange traded, centrally cleared and regulated futures product, supports daily processing, regulatory requirements and reporting Serves as a proxy for European corporate bond debt and a cost efficient alternative for existing benchmarks, i.e. CDS Optimizing portfolio management by reducing daily tracking risk and generating access to leveraged corporate bond beta as a portfolio overlay Offers spread trading opportunities against existing Eurex derivatives products via Eurex TES for block trading and EFP For banks corporate and credit desks it provides an valuable trading and hedging tool, i.e. for structured product and ETFs, at a time where regulatory capital requirements are impacting banks holding of corporate bonds Product Launch The product was launched on September 19, 2017 The launch is supported by a Designated Market making scheme 8

9 EURO STOXX 50 Corporate Bond Index Futures Contract Specifications Contract Standard Product Code Contract value Price Quotation/ Tick size / Tick value Contract Month Settlement Last Trading Day Final settlement / expiration day Final settlement price Daily settlement price EURO STOXX 50 Corporate Bond Index ( Price Index, EUR), corporate bonds from companies that are constituent of the EURO STOXX 50 index at the time of rebalancing FCBI EUR 1000 per index point ( about EUR in notional) In points with two decimal places / 0.01 Points = EUR 10 The three nearest quarterly month of March, June, September and December cycle Cash settlement, payable on the first exchange day after following the expiration day The 3 rd Friday of each maturity month if this is an exchange day at Eurex; otherwise the exchange day immediately preceding that day; close of trading in the maturing futures on the last trading day is 07:00 pm CET Final settlement day is the exchange day immediately following the last trading day Based on Euro STOXX 50 Corporate Bond Index ( Price Index, EUR) closing level on the last trading day Determined from the volume weighted average of all transactions during the minute before 05:15 pm CET (reference point), provided that more than 5 trades transacted within this period Trading hours Order book: Off-book: 08:00 a.m. 07:00 p.m. CET 08:00 a.m. 07:00 p.m. CET (Eurex T7 Entry Services) Market Making Blocktrading Vendor codes 9:00 a.m. - 05:15 p.m. CET Allowed. Block Trade minimum size: 100 lots Bloomberg: CBIA Index, Reuters: 0#FCBI: 9

10 Opportunities in Trading Eurex Corporate Bond Index Futures Exchange traded & cleared derivative Optimized Portfolio Management Spread trading opportunities Efficient hedging tool The Eurex Corporate Bond Index Futures can also be traded outside the order book on a bilateral basis, and subsequently booked to Eurex Clearing through the use of our Eurex T7 entry service. Block Trading Members able to enter bilaterally agreed off-book transactions into the trading & clearing system Registered off-book trades are then automatically cleared like regular exchange transactions The Block Trade Entry facility is fully electronic and integrated into members processes Basis Trading Basis trading can also be facilitated by the Exchange for Physicals (EFP-F and EFP-I) functionality Minimum Entry Size for Block Trades 100 Contracts. There are no minimum entry size restrictions for EFP 10

11 Further Information Product Information For further info on Eurex fixed income products > Publications/ webinars Eurex Circular 071/17, Eurex Circular 094/17 Underlying Instrument Index Currency Index type ISIN Bloomberg Reuters Vendor Codes EURO STOXX 50 Corporate Bond Index EUR Price DE000A0QZJL9 SX5BPI Index.SX5BPI Eurex Products Product name Currency Index type ISIN Product Code Vendor Code Future on EURO STOXX 50 Corporate Bond Index EUR Price DE000A2GF978 FCBI BBG: CBIA Index Reuters: 0#FCBI: 11

12 Eurex Corporate Bond Index Futures January 2018 Liquidity Provider Incentives 2018 A two tiered approach, which allows liquidity providers, to switch quote spread and quote size intraday and still fulfil the LPA requirement: Term Basis LPA scheme runs from 1 January 2018 until 31 December Minimum Quote size / Maximum spread Required Coverage Maturity Range Liquidity Provider fee rebates Tiered approach: 25 contracts on the bid and ask side for a spread of 10 ticks or; 50 contracts on the bid and ask size for a spread of 15 ticks. At least 80 percent of the daily trading hours between 09:00 and 17:15 CET on a monthly average. Current front month contract only until five trading days preceding the last trading day of the front month contract; afterwards, liquidity providers have the choice of quoting the front month or the back month. Rebate of 100 percent for transactions in the electronic order book and for off-book transactions traded on the M-account subject to fulfilment of quote requirements. Revenue sharing A revenue share of 40% of Eurex net trading revenues in Futures from January until December 2018 distributed on a monthly basis to the three leading liquidity providers according to their proprietary trading rank (on- and offexchange volume traded on the P- and M-accounts) in the respective month, provided requirements are fulfilled. Revenue split if fulfilled: 1 LP fulfilled: 40%, 2 LP fulfilled: 25% / 15%, 3 LP fulfilled: 20% / 12% / 8 % 12

13 The combination of the EQ and BI charts the development of the two asset classes, providing a sound analysis of the financial health of Eurozone blue-chip companies Performance 1) comparison vs. benchmark Descriptive statistics 1) EURO STOXX 50 Corporate Bond Index EURO STOXX 50 Index Return 1y (ann.) 0.81% -0.62% Return 3y (ann.) 0.98% -0.02% Dec-10 Dec-12 Dec-14 Dec-16 EURO STOXX 50 Corporate Bond Index (TR) EURO STOXX 50 Index (GR) Return 5y (ann.) 2.82% 8.84% Actual Return Overall 32.85% 58.54% Volatility 1y (ann.) 1.59% 11.85% Volatility 3y (ann.) 1.94% 19.19% Volatility 5y (ann.) 1.92% 18.33% Volatility Overall (ann.) 2.27% 20.48% Sharpe Ratio 1y 2) Sharpe Ratio 3y 2) Sharpe Ratio 5y 2) Correlation 1y Correlation 3y Correlation 5y Maximum Drawdown 3.29% 32.70% 1) STOXX data as of Dec. 31, 2010 until Apr. 03, ) Daily EONIA rate is used as risk-free rate 13

14 Different industry and credit quality versions complement the index family for various investor profiles Industry and Rating Variations Performance comparison vs. benchmarks Descriptive statistics 1) SX5BI Ex- Financials Financials AAA-A Return 1y (ann.) 0.81% 0.84% 0.76% 0.33% Return 3y (ann.) 0.98% 1.04% 0.89% 0.68% Return 5y (ann.) 2.82% 2.78% 2.90% 2.36% Actual Return Overall 32.85% 32.35% 33.57% 28.88% Volatility 1y (ann.) 1.59% 1.88% 1.19% 1.56% Volatility 3y (ann.) 1.94% 2.22% 1.59% 2.05% Volatility 5y (ann.) 1.92% 2.14% 1.66% 1.99% Volatility Overall (ann.) 2.27% 2.47% 2.06% 2.32% Sharpe Ratio 1y 2) Sharpe Ratio 3y 2) Sharpe Ratio 5y 2) Correlation 1y EURO STOXX 50 Corporate Bond Index (SX5BI) Ex-Financials AAA-A Financials Correlation 3y Correlation 5y Maximum Drawdown 3.29% 3.44% 3.56% 3.31% 1) STOXX data as of Dec. 31, 2010 until Apr. 03, 2018, Total Return versions; SX5BI refers to EURO STOXX 50 Corporate Bond Index 2) Daily EONIA rate is used as risk-free rate 14

15 Different maturity versions allow investors to pick the portfolio duration of their choice Maturity Buckets Performance comparison vs. benchmarks Descriptive statistics 1) SX5BI Return 1y (ann.) 0.81% 0.10% 0.43% 0.75% 1.66% Return 3y (ann.) 0.98% 0.37% 0.98% 1.23% 1.16% Return 5y (ann.) 2.82% 1.00% 2.15% 3.33% 4.86% Actual Return Overall 32.85% 13.67% 26.91% 39.52% 57.31% Volatility 1y (ann.) 1.59% 0.46% 1.05% 1.83% 3.38% Volatility 3y (ann.) 1.94% 0.45% 1.17% 2.19% 4.51% Volatility 5y (ann.) 1.92% 0.50% 1.29% 2.34% 4.24% Volatility Overall (ann.) 2.27% 0.78% 1.76% 2.86% 4.71% Sharpe Ratio 1y 2) Sharpe Ratio 3y 2) Sharpe Ratio 5y 2) Correlation 1y EURO STOXX 50 Corporate Bond Index (SX5BI) 1-3y maturity 3-5y maturity 5-7y maturity 7+y maturity Correlation 3y Correlation 5y Maximum Drawdown 3.29% 1.13% 2.78% 4.09% 7.56% 1) STOXX data as of Dec. 31, 2010 until Apr. 03, 2018, Total Return versions; SX5BI refers to EURO STOXX 50 Corporate Bond Index 2) Daily EONIA rate is used as risk-free rate 15

16 The ex-financials version comes in four different maturity versions allowing investors to pick their preferred combination Maturity Buckets 1) - Ex-Financials Performance comparison vs. benchmarks Descriptive statistics 1) Ex-Fin SX5BI Ex-Fin 1-3 Ex-Fin 3-5 Ex-Fin 5-7 Ex-Fin 7+ Return 1y (ann.) 0.84% 0.05% 0.35% 0.66% 1.68% Return 3y (ann.) 1.04% 0.36% 0.96% 1.36% 1.53% Return 5y (ann.) 2.78% 0.83% 1.93% 3.24% 4.96% Actual Return Overall 32.35% 11.84% 24.71% 38.80% 56.33% Volatility 1y (ann.) 1.88% 0.51% 1.13% 1.92% 3.70% Volatility 3y (ann.) 2.22% 0.51% 1.24% 2.33% 4.87% Volatility 5y (ann.) 2.14% 0.51% 1.33% 2.41% 4.49% Volatility Overall (ann.) 2.47% 0.77% 1.81% 2.95% 4.91% Sharpe Ratio 1y 2) Sharpe Ratio 3y 2) Sharpe Ratio 5y 2) Ex-Financials SX5BI Ex-Financials 1-3y Ex-Financials 3-5y Ex-Financials 5-7y Ex-Financials 7+y Correlation 1y Correlation 3y Correlation 5y Maximum Drawdown 3.44% 0.87% 2.50% 3.87% 7.52% 1) STOXX data as of Dec. 31, 2010 until Apr. 03, 2018, Total Return versions; SX5BI refers to EURO STOXX 50 Corporate Bond Index 2) Daily EONIA rate is used as risk-free rate 16

17 Risk and return characteristics of the EUROSTOXX 50 Corporate Bond in a relative context Performance vs. Benchmarks Descriptive statistics 1) EUROSTOXX 50 Corporate Bond Index iboxx Liquid Corporate Diversified Return 1y (ann.) -0.41% -0.37% Return 3y (ann.) 2.02% 2.03% Return 5y (ann.) 3.69% 3.68% Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 EURO STOXX 50 Corporate Bond Index (EU TR) iboxx Liquid Corporate Diversified (EU TR) Actual Return Overall 33.12% 33.14% Volatility 1y (ann.) 1.90% 2.43% Volatility 3y (ann.) 1.92% 2.51% Volatility 5y (ann.) 1.95% 2.47% Volatility Overall 2.33% 2.72% Sharpe Ratio 1y 2) Sharpe Ratio 3y 2) Sharpe Ratio 5y 2) Correlation 1y Correlation 3y Correlation 5y Maximum Drawdown 3.29% 3.74% 1) STOXX & Bloomberg data as of Dec 31, 2010 until Aug. 31, ) EONIA rate is used as risk-free rate 17

18 Eurex Corporate Bond Index Futures January 2018 Correlation between the Euro Stoxx 50 Corporate Bond Index and the Bloomberg Barclays Euro Aggregate Corporate Total Return Index 18

19 Eurex Corporate Bond Index Futures January 2018 STOXX chose independent valuation services from IDC (Interactive Data Corporation) a leading market data provider Source: IDC 19

20 Eurex Corporate Bond Index Futures January 2018 Contacts Sales United Kingdom Derivatives Product Development Derivatives Product Development Vassily Pascalis Deutsche Börse AG UK Representative Office 11 Westferry Circus, Canary Wharf London, E14 4HE United Kingdom P: +44 (0) Jutta-Frey Hartenberger Eurex Frankfurt AG Mergenthalerallee Eschborn Germany P: +49 (0) Jutta.frey-hartenberger@eurexchange.com Lee Bartholomew Head of Fixed Income & FX Product Research & Development Eurex 11 Westferry Circus, Canary Wharf London, E14 4HE United Kingdom P: +44 (0) lee.bartholomew@eurexchange.com Stoxx Product Development Sales Americas Sales Asia & Middle East Yuliyan Georgiev STOXX Ltd. Mergenthalerallee Eschborn Germany Tim Gits Eurex Chicago Representative Office 233 South Wacker Drive - Suite 2450 Chicago, IL USA Markus Georgi Eurex Eurex Representative Office Hong Kong , 29/F, Man Yee Building, 68 Des Voeux Road Central, Central Hong Kong P: + 49 (0) yuliyan.georgiev@deutsche-boerse.com P: tim.gits@eurexchange.com P: markus.georgi@eurexchange.com 20

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