FTSE moves ruffles DJ Stoxx feathers
There has been a lively reaction to the arrival of the FTSEurofirst tradeable indices series from the FTSE Group and Euronext, with Dow Jones Stoxx branding the product as a copy of its DJ Stoxx 50.
In late spring, the FTSEurofirst 80, representing Euro-zone performance and the FTSEEurofirst 100 covering the Euro-zone and the UK were launched. “It seems to be a copy of our index with more constituents,” said former Stoxx managing director Ettore Candolfi about the launch.
Fuel has been added to the fire with research from investment bank JP Morgan commenting that Stoxx may need to enlarge its tradeable index DJ Stoxx 50 index from 50 to 90 stocks in order to compete. “We believe the solution for Stoxx may be to balance to 81 (OK, 90 to give a round number) and pip FTSE to the post before it even gets off the ground.”
Commenting, Andrew Freyre-Sanders and Pablos de Mattos of JP Moragn’s structured portfolio trading research said: “We are sure there is an appetite to enlarge the existing contract.” But they added that FTSE would have its work cut out to overcome the inertia factor in trying to oust an incumbent supplier.
But FTSE was undeterred and launched the futures and options on the two new indices last month, supported by 10 of Europe’s main market makers.
The presence of these traders will ensure that firm prices are available from the start of trading to provide liquidity in these contracts, says FTSE. And on the first day, it reported that both derivative contracts displayed “impressively tight spreads of one and two ticks throughout the day”.
At the end of the first week of trading, the FTSEurofirst 100 future had achieved volume equivalent to around 69% of the trading volume of the DJ Stoxx 50. The average daily trading volume for the first four days was 1,916 lots for FTSEurofirst 80 future and 855 lots for the FTSEEurofirst 100 future contract. The option contracts traded at 156 and 240 lots respectively over the same period.