Derivatives exchange operator Eurex has launched market-on-close futures to facilitate the migration from OTC instruments to on-exchange execution.
The service provides a concept to trade index futures at a price level directly linked to the underlying cash market index close, prior to its publication.
Mehtap Dinc, head of derivatives product research and development at Eurex’s parent exchange group Deutsche Boerse, explained the service is of particular importance to investors using benchmarked products like swaps.
“They utilise index futures at the index close level for hedging purposes, but require a more granular futures pricing than in the regular index futures trading to avoid slippage costs,” she said.
To support the launch, Eurex has established the MOC futures on the Euro STOXX 50 index futures to represent the basis, which is available to trade up until the cash market close level is calculated.
Once this is published, the exact index close level is added to the traded price of the basis to determine the final settlement price.
Eurex added execution of MOC futures is available via the order book and the exchange’s trade entry services.