- The IBEX 35® Rolling Futures Decrement and the SIX Sweden 30 Rolling Futures Decrement indices mark an important regional expansion for indices tracking the futures market
- These indices, which have been licensed to Bank of America for the issuance of new structured products, track the performance of holding a decrement adjusted rolling position in futures contracts
SIX has recently launched two new indices, IBEX 35® Rolling Futures Decrement and SIX Sweden 30 Rolling Futures Decrement, which have been licensed to Bank of America. This launch has been driven by client demand and SIX plans to introduce more such products in the future. These two new indices follow the launch of the Swiss Market Index (SMI) Rolling Futures in December 2024.
“At SIX, we are always attentive to the needs of our clients, who know that we can develop indices that meet their requests in a very short time. Innovation and attention to the needs of our customers are two of our main guiding principles. The launch of the IBEX 35® Rolling Futures and SIX Sweden 30 Rolling Futures and Decrement indices marks an important regional expansion of the index coverage to track the futures markets. We are pleased to support our clients with these for the issuance of new structured products”, said Carmen Lopez, Head Index Services Spain.
“Bank of America is pleased to be expanding its partnership with SIX and BME with the launch of these two new indices, which will complement our offering of custom indices dedicated to structured products. The recent rise of equity financing costs has highlighted the benefits of Rolling Futures Decrement indices, which deliver attractive product economics to the end investor by mitigating the market risks faced by the issuer”, said Bank of America’s Raphael Cyna, Global Head of Payoff Structuring.
These indices combine different investment strategies and provide significant advantages to clients. The Rolling Futures Total Return indices track the performance of holding a long position in futures contracts, while also benefiting from the interest on the cash exposure. Futures contracts have set expiration dates, such as monthly or quarterly. Just before a contract expires, the position is transitioned gradually to the next contract over three days.
On the other hand, decrement indices, such as the IBEX 35® Decrement family launched in 2022, are designed to improve the risk/return profile of the final financial product. They can be used in various ways, such as managing dividend risk, increasing coupon payments, enhancing principal protection, or providing richer optionality. These indices replicate the daily performance of the underlying index, but are discounted by a constant term (known as decrement) on an annualized basis.
In this way, the IBEX 35® Rolling Futures Decrement and SIX Sweden 30 Rolling Futures Decrement combine the advantages of both strategies. As Rolling Futures Total Return indices, they maintain continuous market exposure by rolling over futures contracts before they expire, while, as Decrement Indices, they ease the risk/return profile enhancement through regular deductions. These indices are valuable in creating structured products because they offer predictability and customization, aligning with specific investor risk and return preferences. Additionally, expanding investments into different markets provides diversification, new growth opportunities, and potential benefits from market dynamics, making these indices and strategies essential tools for developing robust and appealing investment products.
You can view the entire range of SIX indices at this link.
