EDX London, the London Stock Exchange’s derivative business, and OMX, its Nordic counterpart, are to capitalize on the surge of Russian companies listing on the LSE by offering futures and options on the 10 most liquid Russian global depositary receipts (GDRs) traded on its order book. In addition, investors will be able to trade derivatives based on the index whose constituents are these stocks, the FTSE Russia IOB Index.
The service, launched in December 2006, will bring an over-the-counter market onto the exchange, improving price and efficiency. Two primary market makers, SG and Deutsche Bank, have been drafted in. Previously diffuse clearing practices have also been replaced by central counterparty clearing and multilateral netting of payments between participants. “The biggest single benefit of the service is bringing multilateral clearing into one place,” says Lee Betsill from EDX London. He adds that in the first week of trading 17,500 futures and options contracts were made.
Demand for derivatives on Russian GDRs has grown on the back of their increasing trading volume. Trading in Russian securities in the IOB index reached £183.1 billion ($358.4 billion) in the first 11 months of 2006, an increase of 188% year on year.