Dividend futures are currently traded on just a handful of markets worldwide but could become the next big asset class for traders as interest in the contracts grows, finds William Mitting.
Last month Eurex experienced record volumes in its suite of
dividend futures and options. The record comes as competition
grows across Europe. Could this product, which was launched in
2008, finally be coming of age?
Jad Comair, the founder of Melanion
Capital, a fund established this year to trade dividend
futures, certainly thinks so.
"Dividend futures are currently a
generalised market with some funds trading them as part of
a portfolio but only Melanion trading them exclusively," he
The contracts, which allow investors
to gain exposure to the dividend of a firm or total dividends
of firms within an index, are a nascent but fast growing asset
class. They began life in the OTC market around the turn of the
millennium with the creation of Diviswaps by banks seeking to
offer a product that offset dividend risk.
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