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The international derivatives exchange Eurex will be launching a new futures product based on the dividends of the Dow Jones EURO STOXX 50® as of 30 June 2008. The introduction of new index dividend futures represent the first time that the pure dividend component of a major equity index has been available for trading and clearing on a stand alone basis at any exchange.
Peter Reitz, member of the Eurex board, said, “our Dow Jones Euro STOXX 50®
Index Dividend future will enable investors to take a view on the dividend that are announced and paid by the individual constituents of the index in each year. The exchange listing of the dividend element of the index separates the dividend risk and increases investor ability to focus on the fundamentals that determine equity values.”
“Since its introduction in 1997, the Dow Jones EURO STOXX 50 Index has been confirmed as the leading index for the euro zone. This index stands for innovation and diversification in indexing and index based products. It is a natural step that our customers use the dividend points of this popular index as basis for their dividend products”, said Werner Buerki, chairman of the supervisory board, STOXX Ltd.
Eurex will initially offer annual contracts from December 2008 out to December 2014 that will capture the dividend stream in that annual period in the form of index point equivalents, making the product complementary to the benchmark traded Dow Jones EURO STOXX 50® Index derivatives. The contract will be cash settled based upon the actual ordinary gross dividends declared and paid in respect of the shares of each individual constituent in the contract period. The final value of the dividend calculation will be undertaken by STOXX Ltd. using the specifications noted in their Dow Jones EURO STOXX 50® DVP (Dividend Points) rule book.
With the introduction of the dividend futures, Eurex wants to serve the current market participants and to attract new market participants to this asset class. The primary aim is to produce a futures contract that is of use to both sell-side market makers and to the complete range of buy-side participants.
Eurex’s index dividend future on Dow Jones EURO STOXX 50® complements the current OTC trading with the advantages of standardized clearing and settlement. The current market in OTC index dividend swaps is estimated at having a turnover of almost €1bn daily, index dividend swaps on the Dow Jones EURO STOXX 50® make up the majority of trading.
