How have you seen the options and more widely, the options market, react to recent market volatility? 
The equity options market is doing very well. This growth accelerated at the beginning of the year, but even before “liberation day” there was a lot of volatility at the single name level. It creates a lot of opportunity for options traders. People are actively trading, they close and reopen positions. They exercise their rights to buy and sell.
Our markets are different sizes and when you add up in total we’re up 24% in growth. In Italy, we are up 43%. In France, up 15%, Amsterdam up 24%. It’s very active. There are a lot of things happening aside from “liberation day”. There is also a reallocation of assets. A lot of investors are looking for a way into Europe. European companies were most certainly undervalued before because the focus has always been on the US.
What is doing really well is the index options. In France, on the top of what’s happening with Mr. Trump there is a lot of political context which has been quite unstable since June last year and so the CAC 40 index option is up 27%.
People talk about fragmentation in Europe. Our market is growing and our investors are very different. I don’t think it’s a good thing to always compare the US and Europe, especially when you talk retail. The US investor doesn’t have a pension. He has to be active on the market. He’s naturally going to be looking into financial markets to find solutions to have a sustainable future.
You’re planning to launch the fixed income derivatives later this year, what’s the driver behind that?
We’re launching in September. All this has been made possible thanks to the acquisition of Borsa Italiana, now Euronext Clearing. Thanks to that we can look into other asset classes which was not possible in the past. The second thing is that we have acquired two cash bonds markets, including MTS which is the institutional cash bond market. We really wanted to diversify on our side.
The fixed income offering is going to be for retail to initiate the liquidity. They invest very highly in the cash bonds market but it’s not at all a retail story. We received a lot of very positive feedback from the large asset managers. Whether you are a smaller investment firm or a very large investment firm, the problem is to reach the institutional size contract which are available at our competitors, they need to pile up the interest.
They need to reach to a certain size before they can send the order. With our contracts they will be able to trade straight away. We need retail to initiate liquidity because when you build a derivative the complexity is to find an end client flow. It’s never only going to be market makers helping you to build this liquidity.
That’s super tough when you go to the traditional buy-side because they have liquidity thresholds and they cannot trade if there’s not a minimum level of ADV or a certain amount of open interest. It’s quite frustrating because when you develop a product that clients want, you need a flow to start with. This is why it’s amazing that we have this retail appetite because it’s a two-step process. We aim to initiate liquidity with retail so we can make it a success story with the buy-side firms across Europe.
What trends are you seeing in the derivatives trading venue competitive landscape?
Europe is a very highly competitive market. The challenge is that a derivatives exchange is an aggregation of products. It’s a lot of products altogether which can respond to each other so that you can get offsets at the clearing level.
It’s complicated to make it appealing, especially to institutional investors who are managing large pools of liquidity and who have capital immobilised and we need to make efficiencies. We have a very strong competition on single derivatives.
How are you seeing institutional investors use derivatives differently and how might this evolve?
What we have seen recently is the development of new contracts like the total return futures. It’s a contract which can place a repo curve or offer banks exposure to hedge structured products. We are definitely seeing more and more buy-side present on these contracts. Historically, it’s been mainly hedge funds but now, we are starting to see more multi-asset managers from more traditional houses participating in this contract. Maybe this could one day replace the standard benchmark features. It’s a contract which allows you to trade for instance the CAC 40 including the dividend risk and interest rates.