Increased demand from investors for Russian equity derivatives has led to the launch by Eurex of its first Russian derivative products this week. Eurex is now offering an index future based on the RDXxt index, specially compiled for this purpose by Wiener Börse, the Vienna stock exchange, as well as four equity options based on Russian depository receipts (DRs) and 16 single stock futures, with more to come. The RDXxt index is a UCITS and CFTC-compliant version of the original Russian index developed by Wiener Börse, but with changes made to meet regulatory requirements (e.g. at least 15 stocks, and 10 per cent capping per stock). The initial range of single stock options is based on those DRs that see the bulk of active trading, namely Lukoil, Gazprom, Surgutneftegaz, and Norilsk Nickel. To date investors have expressed concerns about direct exposure to Russian stocks, and many have chosen to go down the DR route, seeking the legal and regulatory protection established financial markets can offer (Russia itself does not have an insider trading law, for example). All the DRs underlying the Eurex derivatives offering are listed on the London Stock Exchange. The launch comes amidst radical expansion of the overall Russian equity market, with the market literally doubling in value in the last 17 months, and with a tranche of new IPOs reportedly in the pipeline for this year. Like its competitors, Eurex is seeking to win a slice of the sizeable Russian equities derivatives business currently being conducted via OTC trades. Amongst the most active users of OTC contracts are hedge funds, although more traditional asset management houses are also expected to be participating in the new listings. “American investors are currently driving investment, accounting for over 50 per cent of the OTC market, but they cannot invest directly due to restrictions imposed by the US regulators,” said Tobias Ehinger, Senior Product Manager with Eurex. “Lack of insider trading legislation also means the major banks are keen to avoid physical trading in Russia.” By listing the products in US dollars, Eurex is stripping out the currency risk. In addition, its clearing house is guaranteeing trades, thereby stripping out a further layer of uncertainty. Eurex also said it will be opening a Moscow office in May, partly to support the ongoing development of its suite of Russian derivatives, and has signed a memorandum of understanding with the Moscow bourse. Other emerging markets derivatives are being planned for the future. Given that Eurex parent Deutsche Börse owns 5 per cent of the Bombay Stock Exchange, there are sound indications that some kind of India-focused derivatives contracts will be made available. Eurex confirmed that it is currently considering Brazil and China as well, but said that India is the most likely next port of call for its emerging markets derivatives programme.