EDX London, the international derivatives market of trading venue operator London Stock Exchange Group (LSEG), has gone live with dividend futures based on six Russian international order book underlyings.
The contracts, which EDX London says are the first Russian dividend futures to be traded on exchange, are based on stocks Gazprom, Lukoil, Norilsk Nickel, Rosneft, Surgutneftegas and VTB.
Dividend futures provide a fixed payment based on a stock's expected dividend, to be paid out at the end of a contract, which buy-side firms can use to hedge against the risk of reduced dividend payments.
Nicolas Bertrand, head of equities and derivatives for London Stock Exchange Group, said, “The new service on EDX London gives investors the ability to trade or hedge dividend exposure to Russia on exchange for the first time.”
EDX London has worked closely with its members to design the product. Settlement prices will be calculated daily using dividend forecast data supplied by financial information services company Markit.”¨ In the event that there is an announced dividend or part of an announced dividend whose payment is deferred until after the January expiry of the contracts, EDX will list a ”late dividend' contract. This additional contract on the late dividend is completely separate and distinct from ”normal' dividend contracts available in the order book.
LSEG has been aggressively targeting the derivatives market, after CEO Xavier Rolet described it as a market “bereft of competition” at the exchange's bi-annual results presentation on 18 November 2010. At the presentation, Rolet also announced that the group's multilateral trading facility Turquoise would be offering equity derivatives trading from Q2 2011. It will offer European index futures and options and single-stock futures and options, initially with products based on the FTSE 100 index.
Other product developments for the LSEG in derivatives include the launch of 13 new pan-European stock futures on Borsa Italiana’s derivatives market, IDEM, introduced on 20 December 2010.