Eurex At The Forefront of ESG With New Derivatives on Fixed Income

Eurex claims it has become the first exchange globally to offer a standardized, listed, and centrally cleared way to trade derivatives on fixed income indices that embed ESG criteria.

The pioneering role in both the Fixed Income and ESG spaces is the result of the new offering that provides members and market participants the possibility to trade futures on two Bloomberg MSCI indices:

Bloomberg MSCI Euro Corporate SRI index
Bloomberg MSCI Global Green Bond index

Lee Bartholomew, Global Head of Fixed Income Derivatives R&D at Eurex, commented: “We’re keen to support the transition to making the financial sector more sustainability-focused and, of course, we react quickly when there is client demand for certain products. While, on the cash markets, there have for some time been several options available for market participants wanting exposure to Fixed Income strategies that embed ESG methodologies, there was – until today – no such solution in the futures space.”

“With this launch, we not only want to pave the way for further developments in the Fixed Income ESG space, but also enrich the range of available euro-denominated credit derivatives. Indeed, the launch of these Bloomberg MSCI index futures provides an additional entry point for market participants seeking exposure to European corporate bonds via a transparent, publicly listed, and centrally cleared product.”

Riccardo Aimone, Head of Fixed Income Trading in Europe at Susquehanna International Group, said: “A fixed income ESG corporate bond index future will add to the liquidity profile of this segment, and ultimately augment general liquidity in the broader bond market as these strategies continue to grow more popular. It provides a tool for managers of fixed income portfolios to quickly and easily hedge their exposures in an ESG compliant manner. We are happy to support products on Eurex and meet demand from end-users by providing prices both on-book electronically and directly with our trading partners via our sales desk.”

Jéremie Ouaki, Co-head of Trading Credit Flow and Indexation at Société Générale, added: “Société Générale has provided a platform for index-linked products for over 15 years. Previously, for hedging purpose, the market players were mainly using rates products or products linked to Credit Default Swap derivatives. However, none of them are comprehensively covering the main risks in the embedded credit universe, which has triggered a strong interest in credit-related indices. Futures address this need and offer many more possibilities – leveraging, short-covering, intraday trading with sizes – and in a more cost-effective way. In addition, these instruments are more innovative as the underlyings are Fixed Income indices and embed ESG criteria, complementing clients’ growing needs in this space.”

Jasper Jansen, head of Fixed Income Trading at Flow Traders, stated: “Flow Traders has a long history of promoting innovation across the financial markets and has been particularly active in aiding the shift towards ESG investing. In combination with our leading fixed income trading footprint, providing liquidity in these Eurex Fixed Income ESG futures is a natural step for our business. This suite of products supports investors to facilitate in- and out-flows of funds, hedge existing equity exposures, and enhance portfolio performance in a cost-effective way.”

ESG has become one of the top buzzwords within the trading industry and it is likely to stay that way for long as the most countries have committed themselves to go carbon-neutral before 2050. The financial services industry is key to drive that transition.

A recently published research by Kearney has revealed ESG is a deal-breaker when choosing their banking provider to almost half of consumers. One in four European consumers are likely to switch if their bank is not engaged in ESG issues, the report found.