The emergence of Euroland as a distinct area, both with the advent of the euro and as shown from movements in the equity market, creates a specific need to look at Euroland equities as a separate asset class that is distinct from just pan-Europe.
The impact that this trend is having is evident in the trading volumes of the wide range of European and Euroland derivative indices and products. All the major index providers have been keen to establish derivative products that can satisfy both retail and institutional clients as they look to hedge themselves when implementing equity portfolio shifts.
The past year has seen a definitive market choice with the Euro Stoxx 50 index derivatives contract establishing a clear lead as the derivative of choice. Recent figures from Stoxx suggest that, after existing for less than one year, the Stoxx family of products has over e20bn in open interest in exchange-listed derivative products as well as a further e40bn–50bn in outstanding OTC derivative products. The Stoxx 50 and Euro Stoxx 50 are now the third most popular derivative product in Europe after the Dax 30 and the FTSE 100 contracts.
Although the Stoxx derivatives have been successful it is notable that there is an enormous difference between the Euro Stoxx and Stoxx derivatives in terms of general levels of interest and investor focus. The overwhelming interest is focused in the Euro Stoxx 50 index and other associated derivative products, highlighting the emphasis that has been placed on Euroland rather than pan-Europe. It is clear that investors are more willing to diversify from domestic markets into Euroland rather than invest in pan-Europe. In addition to this, the euro derivative product offers a useful investment tool for euro assets.
The other major feature of the Stoxx products is that they trade on the Eurex system and thus have an established presence on the world’s leading derivative exchange. In contrast to this, the new MSCI and FTSE International derivative products are listed on Liffe, which has had a poor record in promoting and encouraging liquidity in the Eurotop 100 contract.
As investors focus on managing Euroland exposure the lead in terms of liquidity currently established by Stoxx looks set to differentiate it from the other index providers, especially with the backing of three of Europe’s main exchanges, the Paris Bourse, Deutsche Börse and the Swiss Exchange.
Nizam Hamid is director, derivatives and portfolio trading at Deutsche Bank in London

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