Eurex, a derivatives exchange and a subsidiary of the Deutsche Börse Group, has launched two euro-denominated fixed income ETF options, the first of their kind launched by an exchange.
The options’ underlying ETFs include the iShares EUR High Yield Corporate Bond ETF (IHYG) and the iShares Core Euro Corporate Bond (IEAC).
Offering options on these ETFs enable investors to hedge or gain exposure to European investment grade and high yield credit indexes.
The launch by Eurex is in response to client demands from across the institutional investor base both in Europe and globally.
Deutsche Börse Group has been trying to increase the adoption of ETFs throughout 2019 having also removed the transaction fees for ETF saving plans.
Brett Olson, head of iShares fixed income ETFs, EMEA, at BlackRock, commented: “We are seeing a virtuous cycle of demand for European bond ETFs developing as more investors become comfortable with the breadth and depth of liquidity in the market, and these options represent another critical milestone.
“It is the first time that investors will have access to options on euro investment grade and high yield ETFs worldwide which provide access to a new tool that is more representative of cash bond markets for hedging risks and taking tactical positions.”
Eurex said that the European market has played a key role in the development of corporate bonds in the financial ecosystem. The exchange launched USD fixed income ETF option in 2017 with volumes reaching in excess of 200,000 in 2019, a five-fold increase versus 2018.