Eurex Launches Liquidity Boost for EURO STOXX 50 Options Market
Eurex is introducing a new liquidity framework for its EURO STOXX 50 Index Options. The goal is to improve liquidity and trading efficiency. This is the first liquidity provider program of its kind, built on the principle that a “good quote is a traded quote.” Testing will begin in May 2025. Full implementation is scheduled for 1 July 2025.
Why the Change?
The European options market faces structural challenges. Firms trading U.S. index options find it difficult to adjust. Core strikes have decent liquidity, but out-of-the-money strikes and longer-dated expiries lack consistent quoting. This creates gaps in the external price picture. A large portion of trades happen off-screen in blocks, limiting transparency and access. Most quotes don’t lead to trades, and liquidity providers rely on Immediate-or-Cancel orders instead of visible quotes.
Goals of the New Framework
The new scheme aims to improve order book visibility across a wide range of instruments. Eurex wants to lower entry barriers for firms new to the market. The framework also focuses on enabling full electronic execution of transactions, making participation easier for all users.
Elements of the New Liquidity Program
These are the core elements of the new liquidity program:
Basis Building Block
Liquidity providers must quote all maturities over a wide delta range during the first two years. The block requires 90% coverage, ensuring a consistent and visible quote curve throughout the day.
Advanced Building Block
Eurex introduces a sliding-scale rebate system. Liquidity providers earn rebates based on the time-weighted quality and size of their quotes. Each provider can adjust their strategy to aim for different rebate levels. This promotes specialization and competition across different parts of the curve.
Passive Volume Incentive
This feature rewards quotes that result in trades. It focuses on passive executions and aims to attract high-quality liquidity. Only a limited number of liquidity providers will qualify, based on their share of passive volume.
Benefits for Traders
This update will have these benefits for traders:
Better Price Transparency
Traders and investors will see more consistent quotes across different strikes and expiries. This makes it easier to assess fair value and make informed trading decisions.
Improved Order Execution
With more visible quotes and better spreads, users can execute trades electronically without relying on block negotiations or off-book activity.
Access to More Instruments
The framework increases quoting across a wide delta range and maturities, giving traders more choices and better coverage for different strategies.
Reduced Transaction Costs
Tighter spreads and more passive liquidity reduce slippage and improve trade pricing, which helps control costs.
About Eurex
Eurex is a derivatives exchange based in Germany. It offers trading in varied European-based derivatives, including futures and options on equity indexes, interest rates, and individual equities. It was established in 1998 through the merger of Deutsche Terminbörse (DTB) and Swiss Options and Financial Futures Exchange (SOFFEX). Eurex became one of the world’s first fully electronic exchanges. In 2012, Deutsche Börse AG acquired full ownership of Eurex, consolidating its position in the derivatives market.
Summing Up
The new liquidity framework for EURO STOXX 50 is expected to improve market quality and increase trading volumes. It removes structural barriers and supports electronic execution.
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