Derivatives Forum, the annual gathering of market participants organized by Eurex, provided on February 26-27 an insightful stage to discuss the latest developments in investing.
STOXX took part in several panels at the Frankfurt event, adding the perspective of an index provider on topics from ‘futurization’ to the ever-expanding menu of index-based investment products.
Axel Lomholt, General Manager at STOXX, participated in the “Index Leaders” panel to discuss how an evolving index offering is propelling the growth of investment strategies. Together with panelists from other firms, they concurred that the multiple benefits of ETFs and the proliferation of trading platforms are introducing new investors to the market and enabling novel strategies.
Customization is also an important factor attracting institutional and retail investors to the market. The advantages of designing unique strategies are plenty, but come at a cost in market fragmentation and liquidity impact, said the panelists. Customization is also an expensive offering for index providers, one that only the established players can afford, said Axel.
“It’s much easier for us in this panel to supply customization because all of us have an incredible back book of strong flagship products, and that back book allows us to underwrite the business,” said Axel. “There is a lot of talk about thematics, factors, and all these fancy strategies, but at the end of the day, it is still massively the flagship benchmarks that take the majority of flows.”
“You can’t scale customization,” he continued. “It’s a huge investment you have to make. For a lot of the new index providers, it is tough. Because (they) don’t have these flagship benchmarks that are supporting the business.”
Concluding the panel, there was a discussion about the state of sustainability investments. The speakers agreed that there is a “lot of noise” about regulation, labelling and a perceived backlash against ESG policies. However, they noted that the “big trend” of asset owners’ interest in climate and sustainability strategies remains intact.
Dividend futures, TRFs
Another panel touched upon the role of index providers in the booming market for dividend futures and total return futures (TRFs). Both products have been among the most successful launches in listed derivatives in the past decade, and the speakers said the adoption curve will continue to climb as market volatility, hedging needs and regulation increase.
“What we do as index providers behind the scenes is make sure that the methodologies remain fit for purpose to facilitate the trading activities of the sell-side and buy-side,” Serkan Batir, Global Head of Product Development at STOXX, told the audience. “And avoid the disruption when it comes to extraordinary market events.”
Serkan added that index firms must balance the need to update methodologies when necessary while ensuring that changes do not disrupt markets where adoption and the trading ecosystem are well established.
“We need to look at the interest of the whole ecosystem, and how our products are facilitating the trading activity, risk hedging, volatility and repo activities, etc.,” he said. “And that our products serve that.”
ESMA fund naming guidelines
A morning session also offered an interesting presentation on the recent ESMA guidelines on funds bearing ESG- and sustainability-related terms in their name. Veronika Kylburg, Executive Director for Global Benchmarks DAX at STOXX, described how STOXX is updating the methodology of some sustainability indices to align with the ESMA rules. Those updates were based on input gathered through market consultations. In Veronika’s words, it’s important to work alongside clients and in consideration of current products’ take-up, to help them stay up to date with evolving regulation.
Equity volatility
Last but not least, STOXX was also present in a timely “deep dive session” on equity volatility. Armelle Loeb, Executive Board Member, gave an overview on the VSTOXX® and the vast menu of derivatives, including futures and options on futures, tracking the volatility index (Figure 1). Thomas Shuttlewood, from STOXX’s Product Research and Development team, unpicked the methodology and calculation of the whole VSTOXX family. Interest in volatility as an asset class and hedging instrument isn’t slowing down. STOXX recently published a thorough whitepaper covering the basics and use cases of volatility trading.
Figure 1: VSTOXX futures and options annual volumes traded on Eurex
The panels took place with an increasingly murky geopolitical backdrop, coinciding with tariff threats from the US and the Trump administration’s announcement that it will not support Europe’s defense as much as it did historically. At the same time, the STOXX® Europe 600 benchmark is trading at all-time highs. Speaking at the event, Thomas Book, Executive Board Member at Deutsche Börse, said that higher volatility and uncertainty usually increases demand for hedging instruments.
What comes next
The two-day Eurex event grows year on year and in 2025 drew hundreds of participants. Other topics of discussion included regulation, cryptocurrencies, quantitative investment strategies and geopolitics.
The listed derivatives markets in Europe may be at a tipping point leading to rapid expansion, driven by changing attitudes to regulation, innovation and investor education, according to a consensus of speakers. In that sense, the event was an insightful opportunity to listen what shape that future may take.