Eurex, Capitalab execute compression in equity index derivatives

Eurex and Capitalab have become the pioneers in Europe to execute compression in equity index derivatives. The successful production run was completed on July 20, 2021, Eurex said today.

Eurex is the first European exchange to support compression services in its listed equity index business, addressing the industry-wide challenge of high cost of underlying capital for trading derivatives. Capitalab is an established compression services provider which now offers compression of exchange-traded European equity index derivatives, starting with EURO STOXX 50 Index Options listed at Eurex.

This new service enables Eurex participants to proactively reduce their open positions and lower the capital costs of derivatives. Positions are netted against each other multilaterally, so each participant’s position is reduced. Risk parameters set by the participants ensure that the portfolio’s risk position only changes within a predefined tolerance.

As a first stage, it is expected that one compression run per month will be conducted. Extension to additional products will depend on market demand.

Jean-Pierre Aubin, co-global head of brokerage at BGC Partners and CEO of Aurel BGC: “Capitalab are pleased to work with Eurex and offer compression services for one of the most liquid benchmark index options worldwide. We expect the service to provide significant capital relief, especially as client participation gains momentum.”

Michael Peters, CEO of Eurex:

“We have been collaborating with Capitalab to adopt compression for our benchmark equity index derivatives. This is the solution to customer demand to optimize their outstanding positions and utilize capital more efficiently.”