If you’re thinking about trading futures and options, it’s important to understand the exchanges where such transactions take place. The Eurex Exchange – the shorter name for the European Futures and Options Market – is one of the largest derivatives markets in the world.
Here’s what you need to know about the exchange:
The Eurex Exchange facilitates the European-based derivatives market, handling digital trading volume, and contract settlement, for global traders in 700 markets across the world. While large volumes traded on the Eurex include common stock indexes and more complex securities, such as derivatives.
Eurex is one of several global derivatives exchanges, including the CBOE.
What Are Derivatives?
Derivatives are investment vehicles that, unlike stocks, do not involve ownership in a specific company. They do, however, track the investment performance of that company, the underlying asset. For example, a “call” stock option, enables the option owner to buy a stock at a specific time and at a specific price. While the option’s ultimate portfolio tracks the performance of the underlying stock, the options itself does not represent direct ownership of a publicly traded company.
Pricing derivatives can be complicated, and investors often use complex formulas such as the Black-Scholes Model to arrive at valuations.
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Driven by Technology: Eurex History – A Snapshot
It was co-founded in 1988 by Deutsche Börse AG and the SIX Swiss Exchange and was billed as one of the largest and one of the first all-electronic trading exchanges. That partnership lasted until 2012, when Deutsche Börse AG bought out SIX Swiss and now stands as the sole owner of the Eurex.
Headquartered in Frankfurt, German, the exchange has nine offices spread across the globe, in Chicago, London, Paris, Tokyo, Hong Kong, Singapore, Leipzig, Eschborn, Zurich, and Frankfurt (headquarters). That makes it easier for the Eurex to trade in non-European bourses and thus gives the Eurex a thoroughly global presence.
Technology Plays a Big Role
Eurex launched as an all-digital trading exchange at a time when manual “open cry” trading still remained the primary way of doing business. At that time, buyers and sellers would gather in closed areas (called “trading pits” in Wall Street lingo) and shout trade orders to market makers, who would gather the trades and execute them on behalf of traders.
In strictly electronic trading, buyers and sellers execute options and futures trades from thousands of miles away via a digital-based trading platform. That also provides increased liquidity for traders. Since Eurex is 100% automated, market investors have quick access to a wide array of investment products, making it easier to move in and out of volatile positions in fast-moving markets.
Rolled out in 2013, the Eurex’s trademark T7 trading platform handles all the exchange’s electronic derivative trading volume, connecting traders from 35 countries who execute about seven million futures and options trading contracts for each daily trading session.
That makes Eurex one of the most widely used derivatives trading platforms in the world, listed and over-the-counter futures and options trading.
Eurex offers a wide range of trading options, including various Euro-based debt instruments, common Euro-based stocks and stocks indices, along with its mainstay futures and options derivative trading products.
Here’s a list of the exchange’s most widely-traded investment vehicles.
• Stock derivatives, including more than 1,000 futures and approximately 700 options.
• Interest rate derivatives, including fixed-income, money market, and interest rate swaps.
• Equity index derivatives, including derivatives from 12 primary European index, such as EURO STOXX and MSCI
• Dividend-based derivatives, including singles stocks and indexes.
• Volatility derivatives
• Exchange-traded fund derivatives
• Foreign currency (FX) derivatives
• Commodity-based derivatives
• Property/real estate derivatives
The exchange is in the process of building a platform for trading digital assets, such as cryptocurrency.
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The Eurex is an important exchange that global derivatives traders use to execute their strategy. Individual investors can typically access the exchange through their brokers.
However, it’s not necessary to invest on the Eurex or trade derivatives in order to build a portfolio. If you’re new to the investment world, a great way to get started is by opening a brokerage account on the SoFi Invest investment platform. It allows you to build a portfolio that includes stocks, exchange-traded funds, and fractional shares, without paying commission.
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