Options on trackers will widen the range of strategies applicable to trackers, by allowing risk management together with performance dynamism; NextTrack, the segment dedicated to trackers, and Euronext.liffe equity derivatives businesses will both benefit from it.
These products will be listed on the MONEP, and will get all the guarantees offered by an organized market: transparency in the price discovery, and the guarantee of Clearnet, Euronext's clearing house and central counterparty. They will be electronically traded on NSC-VO, and will migrate on 14 April 2003 onto LiffeConnect, the trading system that will be used for all derivatives Euronext products. Committed market makers will be appointed to ensure these new products' liquidity. Unlike index options, options on trackers will offer physical delivery of the underlying.
The list of the options on trackers listed from 23 January 2003 will be communicated at the beginning of January. The eligilible underlying trackers will have to meet liquidity criteria approved by the Commission des Opérations de Bourse : 3 months of trading, replication of a widely known index, at least 5 trades per day and 10 000 trackers traded per day over the last 3 months, at least 2 liquidity providers on the underlying.
Euronext is the European leader for listing and trading trackers. NextTrack, the Euronext segment dedicated to trackers, was launched in January 2001 and is a successful achievement : 62 trackers listed, 68% market share in assets under management in Europe, and a 45 to 50% European market share in turnover. NextTrack has now reached a high level of liquidity, favourizing the creation of options on those products, and meeting in this way the market's demand.
Trackers, or Exchange Traded Funds (ETF), are index funds listed and traded on Euronext cash markets. These products offer the performance of an index and ally the advantages of the shares (simplicity, continuous quotation), to those of the traditional funds (access to a vast choice of shares, geographic and sector-based diversifications).
