Dividend swaps in markets with liquid exchange-traded products are almost completely dealer-to-dealer
New data made available by swap data
repositories (SDRs) has exposed a gap in the dealer-to-client
market in the US for dividend futures. Exchanges report that
the low interest rate environment has driven up buy-side
interest in dividend products, as they offer a return that is
perceived to be less volatile than equities but typically
higher than bonds. Listed dividend products are available on
major indices around the world, and have been gaining
popularity with the buy-side. Yet an apparent dispute between
regulators is preventing the opening of the US market.
The Euro Stoxx 50 dividend future had
US$9.4 billion in notional outstanding in March 2014, according
to US regulator the Commodity Futures Trading Commission
(CFTC), which analysed SDR data for the period January to March
2014 last year. That dwarfed the notional outstanding in Euro
Stoxx 50 dividend swaps (US$2 billion) and in S&P 500
dividend swaps (US$3.6 billion) combined.
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