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Food for thought: the future is not what it used to be

Release date: 27 Jun 2018 | Eurex Exchange

Food for thought: the future is not what it used to be

Game changers in the derivative industry

That markets and industries are continuously changing is nothing new. New is the speed in which these changes happen. Steady evolutionary development is outdated; disruptive is the word of the day. What does that mean for us? What are the game changers in our industry?

Let us take a step back to see what is driving our business. Client’s needs – pure and simple! To fulfil these needs we have two major tasks: to guarantee fair and stable markets for all and – more importantly – continuously come up with innovations. Only then will we be able to successfully face the three game changers we have identified for our industry:

Investment behaviour

The rise of the buy side with its shift to passive strategies will be one of the driving forces. Moody’s projects that passive assets under management will overtake active assets by 2024. Since the buy side complements the traditional position of the sell side, attracting further buy side flows is beneficial for all our market participants. One area where we are very successful is our suite of MSCI derivatives that meet the needs of the passive investment space. Another example is our clearing model ISA Direct that addresses the buy side.


Regulation is a game changer that creates vast opportunities for all of us because it forces a shift towards standardization and transparency. To further attract OTC volume to our platforms could be an important growth driver. Which brings us to futurization, for many years a buzzword without much substance, which by some in our industry has already pronounced dead. But as they say, the condemned live longer and have, in our case, helped us to successfully transform the OTC dividend swap market into an almost completely exchange-traded market. We were also the first exchange to offer a futurized version of Total Return Swaps, which we call Total Return Futures. We have already migrated up to 30 % of the OTC swap market in EURO STOXX 50 derivatives in only one year. Unfortunately, incidents upon which we have little to no influence also have a regulatory impact. The geopolitical situation with the ongoing Brexit uncertainties as well as the trade disputes between Europe, China and the US determine the regulatory framework we all operate in. We need to work together to ensure that a solid infrastructure and free capital flows remain the foundation for economic growth around the globe.


The third and probably biggest game changer is technology, such as advanced artificial intelligence (AI) functionalities that could have an unprecedented effect on the world’s economy. The financial markets have been quick to pick up the new technologies to drive efficiency, curb risk, and enhance the quality of service through automation. We need to stay ahead of the curve, be open to automating even small tasks, in order to reduce operational risks and costs across the entire derivatives trade processing lifecycle. The decision is simply will we develop our industry or will we be “developed” away by new players in the market.

The future depends on what we do today. Let’s get to work.


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