A new pan-European futures contract is to be launched by NYSE Liffe, based on an index that contains the 300 most rapidly traded small and mid-cap listed European companies, in a bid to boost liquidity in the segment.
From October 1, futures contracts based on the Russell Europe SMID 300 Index, which has been created by Russell Investments, a U.S. indices compiler, will be listed on NYSE Liffe’s Bclear wholesale derivatives service. NYSE Liffe is the European over-the-counter derivatives arm of transatlantic exchange operator NYSE Euronext.
Seattle-based Russell, a leading provider of U.S. equity indices, wants to establish a firmer footing in the European market. Many U.S. investors use mutual funds or exchange-traded funds based on the Russell Indexes as a way of gaining exposure to certain portions of the U.S. stock market, while U.S. investment managers use the Russell Indexes as benchmarks against their own performance. For example, the Russell 2000 Index is by far the most common benchmark used to measure the performance of the small-cap segment of U.S. equities.
“We are very excited that NYSE Liffe is launching futures on the Russell Europe SMID 300 Index, a highly tradable index of small and mid-cap European stocks,” said Scott Stark, head of Russell Indexes Europe. “We designed our new index to meet a clear need in the marketplace, and are pleased we are already seeing a strong acceptance.”
NYSE Liffe says it will be the first index of its kind in European equity markets for highly liquid constituents covering the small and mid-cap segment. The index, which was designed with input from leading broker-dealers—including Barclays, Deutsche Bank, Goldman Sachs and UBS—for ease of use, represents a low implementation cost alternative to existing indexes, according to NYSE Liffe. The index has also been built to minimize the length of time it takes to trade a basket of stocks that replicates the index constituents and their weights.
“With the launch of this futures contract on the Russell Europe SMID 300 Index, we are providing our customers with a unique product to access Europe’s small and mid-cap companies,” said Ade Cordell, executive director of equity derivatives at NYSE Liffe.
Bclear has processed over 1.4 billion equity derivative contracts since its launch in 2005 with a value of €15.4 trillion. Bclear is NYSE Liffe’s service for processing and clearing OTC derivatives within the secure environment of a Recognised Investment Exchange and a Recognised Clearing House.