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Spain: Equity Derivatives

A special report prepared by Santander Investment.

A EUROMONEY SURVEY - MARCH 1996

Background

The past couple of years have seen major developments in the Spanish equity markets, with increasing sophistication and more complex products becoming available. Consequently, the derivatives market is growing in importance. There is continued high-volume trading of futures on Spain's IBEX-35 index, on the equities futures exchange MEFF-RV. Growth in the domestic market has been sharp.


Index futures account for about 70% of MEFF-RV traded contracts. These type of contracts have witnessed explosive growth. Total exchange-traded equity derivative contracts are up from just over five million in 1992 to 37 million in 1995.


Derivatives on Spanish equities only commenced in 1992 with the introduction of futures and options on the capitalization-weighted stock index, the IBEX-35. The introduction of these derivatives paved the way for a growing volume of business in the last few years and the launch of new products such as traded stock options on Spanish giants Telefonica, the telephone company, and Endesa, the electricity company. Volumes in stock options have also grown tremendously.


During 1995, equity options and futures traded at MEFF grew by 5%, reaching a nominal value of Pta13 trillion.