Record growth in dividends welcomed

Arrow up 2The record number of dividend-based deriviatives traded on Eurex has been welcomed as it will deepen liquidity and encourage other exchanges to trade these contracts.

Jad Comair, founder and chief invesment officer of Paris-based Melanion Capital, says : “The large volume increases we’re witnessing in the sector are good for our investors, not only because of an increase in liquidity but also because they will encourage further diversification as new exchanges enter the marketplace and new contracts are launched. ”  

According to Eurex, September’s monthly trading was a record high of 989,000 contracts representing an increase of 52% year-on-year.  

Dividend derivatives trading splits into indices and single stocks. During September, open interest in Eurex dividend indices grew to over 3.5 million contracts and open interest in single-stock dividend futures grew to some 1.6 million contracts.

The volume of Vodaphone dividend futures changing hands as the company announced the sale of its large stake in Verizon Wireless helped growth.

“Because they’re simple, easy to understand and answer investors’ needs to hedge their dividend exposure, dividend futures have become one of the few highly successful new contract segments launched by derivatives exchanges in the past few years,” says Comair.

Melanion recently launched launched the first dividend futures fund. Amundi this week also launched what it says is the first global implied dividend fund.

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