Euronext to offer variance future contracts

Source: Euronext

Euronext.liffe, the international derivatives business of Euronext, today announced its plans to offer the first cleared-only, exchange solution for Variance Futures, by launching Variance Futures Contracts on Bclear from 18 September 2006.

The Variance Futures contracts will initially cover the FTSE 100, CAC 40 and AEX indices.

Variance is a measure of volatility, which is increasingly being traded as an asset class in its own right. Variance products provide exposure to pure volatility and are growing in popularity because they are easier to hedge than Volatility Swaps. Variance is typically traded in the form of Variance Swaps in the over-the-counter ("OTC") market, but trading OTC has its drawbacks, such as operational and counterparty risk.

With Bclear, users maintain the flexibility to negotiate Variance Futures trades directly and privately, before registering these trades as an Exchange Contract. Because trade confirmation is real-time and automated, Bclear helps to reduce operational risk. The presence of a central counterparty (LCH.Clearnet Ltd.) also means that counterparty risk is efficiently managed.

In line with all other Bclear contracts, there will be a per trade fee cap in place for Variance Futures.

Euronext.liffe’s chief executive, Hugh Freedberg, said: "Over 35 million equity derivatives contracts have been registered through Bclear in its first nine months, demonstrating its strong appeal to the market. With futures and options on over 350 European blue-chips, as well as 12 indices, Bclear already offers tremendous product coverage for our customers. By extending this product range still further to include Variance Futures, customers who typically trade Variance Swaps in the OTC market will also benefit from Bclear’s unique combination of off-exchange flexibility with on-exchange security and efficiency."

Chris Welsh, Managing Director of Mako Group, said: "In recent years we have seen equity volatility emerge as an asset class in its own right and there has been an increasing demand for equity volatility products. Exchange-listed variance contracts are likely to appeal to both prop traders and asset managers, who now have the opportunity to trade a standardised variance product across a centrally cleared platform."

Additionally, the annual general meeting of Euronext N.V. held on Tuesday 23 May 2006 approved the extraordinary distribution of €3 per share by way of a share capital repayment payable on Friday 11 August 2006, on condition that all applicable legal requirements and formalities are complied with by then.

Euronext is pleased to announce that this condition will have been met on 10 August 2006.

As a result:

  • Euronext N.V. shares will be traded ex €3 share capital repayment as of the opening of the markets on Thursday 10 August 2006
  • €3 per share will be paid on Friday 11 August 2006
  • The share capital repayment will not be subject to dividend withholding tax

Pursuant to the change in the nominal value of the share, Euronext N.V.'s shares will be traded under a new ISIN as from 10 August 2006: NL0000290641.

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