Intercontinental Exchange (ICE) has today launched MSCI Index total return futures (TRFs), offering exposure to MSCI’s flagship indices including MSCI EAFE Index, MSCI Emerging Markets Index, MSCI USA Index and MSCI World Index.
According to ICE, the TRF contracts serve as an exchange listed alternative to over-the-counter total return swaps that seek to replicate the performance of MSCI’s indices in a more “capital-efficient and transparent” way.
The underlying US funding rate Secured Overnight Financing Rate (SOFR) will be used by the contracts, which measures the cost of overnight cash borrowing.
The contracts are available to trade out the curve to 2033, with both quarterly and yearly expiries.
“We have worked directly with the market to design the TRF contracts, which allow clients to benefit from trading in a US time zone, against the closing MSCI index level and report the trade on the same day, utilising the truly global nature of ICE’s equity derivatives offering,” said Caterina Caramaschi, vice president, financial derivatives at ICE.
ICE’s futures on MSCI EAFE, MSCI Emerging Markets, MSCI ESG and MSCI Climate indices, provide participants globally with a set of tools to manage equity risk.
Last year, the average daily volume for ICE’s MSCI complex was roughly 214,000 contracts, equivalent to an estimated $14 billion of notional value. ICE MSCI futures traded over 53 million contracts in the same period.
“Goldman Sachs is excited about the launch of ICE MSCI Index TRFs. We expect it to be an excellent product for clients seeking a cost-effective solution to access a range of flagship MSCI indices,” said Daria Sentuc, managing director, emerging markets global synthetics at Goldman Sachs.
“As a long-established provider of liquidity across the MSCI complex, we look forward to supporting growth in this new product.”
MSCI’s global head of fixed income and derivatives, George Harrington, added: “We’re pleased to license ICE as they expand their TRF segment to include MSCI indices. This reflects the increasing demand for new products linked to MSCI’s global benchmarks.”