“We have worked directly with the market to design the TRF contracts, which allow clients to benefit from trading in a U.S. time zone, against the closing MSCI index level and report the trade on the same day, utilizing the truly global nature of ICE’s equity derivatives offering.”
Intercontinental Exchange, Inc. (ICE) has expanded its equity derivatives offering with the launch of MSCI Index Total Return Futures (TRFs), which emerge as an exchange-listed counterpart to the traditional over-the-counter total return swaps.
Utilizing the SOFR (Secured Overnight Financing Rate) as the underlying U.S. funding rate, the contracts offer insights into the cost associated with overnight cash borrowing. They are slated for trading with expiries stretching to 2033, encompassing both quarterly and yearly timelines.
The introduction of ICE’s MSCI TRFs extends to investors a novel avenue to access MSCI’s principal indices, including MSCI EAFE Index, MSCI Emerging Markets Index, MSCI USA Index, and MSCI World Index.
In 2023, ICE’s MSCI futures complex saw an average daily volume of around 214,000 contracts, which translates to an estimated notional value of $14 billion. The total contracts traded surpassed 53 million, underscoring ICE’s significance in the marketplace.
“ICE’s markets account for over 70% of global MSCI futures trading by volume”
Caterina Caramaschi, Vice President, Financial Derivatives at ICE, said: “ICE’s markets account for over 70% of global MSCI futures trading by volume, making ICE the natural home for customers to trade MSCI Total Return Futures alongside our deeply liquid suite of MSCI Futures. We have worked directly with the market to design the TRF contracts, which allow clients to benefit from trading in a U.S. time zone, against the closing MSCI index level and report the trade on the same day, utilizing the truly global nature of ICE’s equity derivatives offering.”
Daria Sentuc, Managing Director, Emerging Markets Global Synthetics at Goldman Sachs, commented: “Goldman Sachs is excited about the launch of ICE MSCI Index TRFs. We expect it to be an excellent product for clients seeking a cost-effective solution to access a range of flagship MSCI indices. As a long-established provider of liquidity across the MSCI complex, we look forward to supporting growth in this new product.”
George Harrington, Managing Director, Global Head of Fixed Income and Derivatives at MSCI, added: “We’re pleased to license ICE as they expand their TRF segment to include MSCI indices. This reflects the increasing demand for new products linked to MSCI’s global benchmarks.”
Cboe launched three options based on MSCI indices
Last month, Cboe launched three new options based on MSCI’s benchmark indices for international, developed, emerging, and U.S. markets, with a planned launch date of March 18.
The new options are the Cboe MSCI World Index Options (MXWLD), Cboe MSCI ACWI Index Options (MXACW), and Cboe MSCI USA Index Options (MXUSA). In addition to the index options, Cboe will introduce two new volatility indices: the Cboe MSCI EAFE Volatility Index (VXMXEA) and the Cboe MSCI Emerging Markets Volatility Index (VXMXEF).
These indices are developed using Cboe’s proprietary VIX Index Methodology and are based on the existing MSCI Index options, offering measures of expected volatility in international and emerging equity markets. The new index options will have standard expirations on the third Friday of each month, with additional five end-of-week expirations planned to start on March 21, 2024.
