ICE Expands Equity Derivatives Portfolio with MSCI Index TRFs
Intercontinental Exchange Inc. (ICE) has broadened its equity derivatives portfolio by introducing MSCI Index Total Return Futures (TRFs), offering investors an exchange-listed alternative to traditional over-the-counter total return swaps. These contracts, designed in collaboration with the market, allow clients to trade in a U.S. time zone against the closing MSCI index level and report trades on the same day, leveraging ICE’s global equity derivatives platform.
About the Expansion of Equity Derivatives Portfolio
Intercontinental Exchange has introduced MSCI Index Total Return Futures, offering investors a listed alternative to traditional total return swaps. These contracts, designed with market input, enable U.S. time zone trading against closing MSCI index levels, leveraging ICE’s global platform. Utilising the SOFR as the underlying funding rate, TRFs provide insights into overnight borrowing costs, with expiries up to 2033.
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What Does It Mean for Traders?
The launch of ICE’s MSCI Index Total Return Futures presents several implications for users:
Enhanced Accessibility
Users now have a more accessible avenue to trade MSCI’s principal indices, including the MSCI EAFE Index, MSCI Emerging Markets Index, MSCI USA Index, and MSCI World Index, through exchange-listed TRFs. This expanded accessibility allows for greater participation in global equity markets.
Efficient Trading
With TRF contracts designed to enable trading in a U.S. time zone against the closing MSCI index level and reporting trades on the same day, users benefit from enhanced efficiency and streamlined processes. Using the SOFR as the underlying U.S. funding rate also provides insights into overnight cash borrowing costs, aiding users in making informed trading decisions.
Diverse Trading Options
ICE’s introduction of MSCI TRFs offers users a wider range of trading options with expiries extending to 2033, catering to both quarterly and yearly timelines. This diversity in trading options allows users to tailor their trading strategies to their specific investment objectives and risk preferences.
Industry Validation
Industry players such as Goldman Sachs and MSCI have endorsed ICE’s MSCI TRFs, reflecting the market’s recognition of the product’s value proposition. Users can confidently rely on the support of established institutions and anticipate a positive reception within the investment community.
About Intercontinental Exchange
Founded in 2000, Intercontinental Exchange, Inc. (ICE) is a top financial market infrastructure provider, offering trading, clearing, and data solutions for various asset classes. In terms of revenue, futures contracts on ICE were valued at $14 billion. ICE also accounts for 70% of the total MSCI futures trading in terms of volume as of 2023.
Way Ahead
ICE’s MSCI Index TRFs provide investors with efficient access to MSCI’s top indices, with U.S. time zone trading and same-day reporting. Expected developments: market adoption, product evolution, liquidity, compliance, and competition against Cboe’s MSCI options. ICE is ready to lead the market in equity derivatives trading, meeting the needs of global investors.
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