Eurex
Retail trading in Europe’s listed derivatives stayed somewhat muted as investors have access to various leveraged products like CFDs and warrants. However, European markets are increasingly seeing volume growth from American retail investors.
This year, a record number of people will go to the polls to choose their leaders, and three key elections in Europe have driven volatility in the first half of 2024, creating opportunities for U.S. retail and institutional traders.
In early June, EU citizens went to the polls to elect the European Parliament. This month, the U.K. and France have chosen their next parliaments following snap elections by Rishi Sunak and Emmanuel Macron. All this is driving interest from American retail investors to trade European listed futures, according to Clayton Passero, Managing Director and Head of Futures Online at StoneX. Clayton adds:
We are seeing U.S. retail traders increasingly tap into European markets to broaden their portfolios and explore fresh avenues for growth, signaling robust expansion.
“In the evolving context of 2024, elections like the European Parliamentary and UK elections introduced uncertainty, yet held opportunity for retail and institutional traders from the U.S.”
Over the past decade, European financial markets have lagged behind the U.S. regarding its appeal to retail investors. The high growth of U.S. tech stocks and the relative market correlation between the U.S. and Europe meant that U.S. retail investors previously had limited exposure outside their domestic markets.
However, as the sophistication of these traders grew and the shine, to some extent, came off the U.S. tech sector, the main driver for the S&P index's performance, in the face of rising interest rates over the past three years, U.S. retail traders started looking at other markets.
In 2021, Eurex introduced micro versions of its flagship DAX® and EURO STOXX 50® contracts, tapping into the growing global trend towards smaller contract sizes.
“Given their scale, the most popular products amongst retail traders typically are Micro-DAX® and EURO STOXX 50® contracts,” says Passero.
“The ECB’s recent decision to be the first to cut interest rates marks a significant development affecting FX, interest rate, and equity markets. Consequently, as Europe diverges from U.S. policy, numerous opportunities emerge across these sectors.”
The DAX® and EURO STOXX 50® are ideal products for U.S. retail traders looking to take a view on trends in European markets. The DAX is the benchmark index for German stocks, while the broader EURO STOXX 50® includes French and German market leaders such as L’Oreal, SAP and Mercedes, as well as other companies across the Eurozone, such as Aegon in the Netherlands and Arcelor Mittal in Luxembourg.
Therefore, traders can use futures on the products to gain exposure to Germany or the wider European market. Eurex offers Mini-DAX® and micro contracts on both indexes to increase the appeal to U.S. retail traders. In addition, the exchange has launched daily options on both the EURO STOXX 50® and the DAX®.
In addition to the benchmark index products, Eurex offers volatility trading to U.S. investors via the VSTOXX® Indexes, which reflect volatility on the EURO STOXX 50®.
The increase in U.S. retail investor engagement comes as U.S. institutional investors also increase their European exposure. For institutional investors, Europe offers diversification from their home markets and the ability to trade exposures in different time zones. This creates a virtuous circle of growth in European listed derivatives markets.
According to Passero, StoneX sees significant growth opportunities in Europe for retail and institutional investors in the U.S.
“Committed to our partnership with Eurex, we persist in investing to facilitate U.S. traders' access to European markets. In addition to our EU-based GCM, we were among the first American GCMs to secure a clearing membership on Eurex and have since bolstered our commitment with significant investments in the region,” he says.
Rachna Mathur, Head of Equities for Americas at Eurex, adds:
We are very happy to work alongside StoneX and other U.S. brokers to educate retail investors on the opportunities in European markets and how they can access them.
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