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Randolf Roth Discusses Regulatory Challenges and Market Growth in JLN Industry Leader Series

May 21, 2024

John Lothian

John Lothian

Executive Chairman and CEO

May 21, 2024 — In a recent interview as part of the JLN Industry Leader Series at the Options Industry Conference sponsored by the OCC, Randolf Roth, executive member of the Eurex board, shared insights into the evolving cryptocurrency and derivatives markets, highlighting both regulatory challenges and market growth.

“Two and a half years ago, we launched our Bitcoin ETN product, primarily to navigate the complex regulatory landscape,” Roth said. This initial product has set the stage for more complex derivatives and coins, despite the stringent regulations from both German and European authorities, he said.

Roth noted significant market interest, stating, “We are now focusing on index-based products and have traded 90,000 contracts in the first year.” Eurex has seen considerable interest from retail investors, hedge funds, market makers, and ETN providers, he said.

Reflecting on the Options Conference, Roth said the conference was fascinating, especially hearing the growth stories from the US industry. He said he learned a lot about both the successes and the areas needing improvement. Despite the liquidity in the options markets, there are still significant challenges, he said.

Discussing the state of volatility trading, Roth explained, “The VSTOXX index has traditionally been seen as the smaller counterpart to the VIX. However, the COVID-19 pandemic caused market corrections.” He said increasing volatility impacted overall liquidity and client usage, and over the last 18 months, Eurex invested in growing the product, enhancing liquidity provider schemes, and improving client education. This April, Eurex saw a return to pre-pandemic levels, with 80,000 average daily volumes in futures and a notable increase in options trading, he said.

The launch of total return futures and three MSCI indexes aligns with Eurex’s strategic goals. Eurex’s core strategy is to future-proof products based on client demand. It has introduced total return futures to move swaps into a regulated and familiar exchange environment. Since launching in March, these products have been used for equity financing, beta replacement, and hedging repo rates, he said.

Roth also highlighted a shift towards retail investment. Historically, Eurex’s focus wasn’t on retail due to low demand in Central Europe. However, with retail investors becoming more professional and sophisticated, it has launched a global retail strategy. This includes education, reducing entry barriers, and offering retail-focused products like micro futures. Eurex is seeing growth in this segment, particularly from investors seeking global expansion, he said.

Finally, addressing the OTC FX futures trading migration, Roth said regulatory changes have increased the cost of holding OTC positions, prompting banks to invest in automation. Eurex has doubled its clearing members in the FX segment from 11 to 22 in the past year.
Eurex’s partnership with 360T, a successful FX marketplace, has been instrumental. In the first quarter of this year, Eurex traded three-quarters of a million contracts, with 40% growth. He said building a market from scratch is challenging, but regulatory momentum is helping Eurex create a thriving futures market.

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