A Strong Year for LSEG Derivatives
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NUMBER 5 DERIVATIVES OCTOBER 2018 05 A strong year page 2 for LSEG derivatives TOL Expo 2018: Borsa Italiana meets The first nine months of 2018 will be remembered for the strong performance of LSEG the online trading Derivatives Markets, thus it is worth highlighting some key achievements in terms of community initiatives and volumes. With respect to the IDEM market, the extension of trading hours of the FTSE MIB futures and FTSE MIB mini-futures is continuing to deliver: additional trading firms started to be page 4 active in the after hours sessions, setting a new all-time volume records in October 2018 with more than 15% of mini-futures volume traded in the evening session. Overall, FTSE Piazza Affari’s MIB futures volumes are up 15% and FTSE MIB mini-futures volumes are up 22% year Mid Caps to date, on the back of growing demand from institutional investors also overseas. Also options business has been sustained so far: FTSE MIB options have been growing by 38% year to date, while Mid Cap equity options business have been fast developing thanks to the commitment of the market making community and growing demand from asset page 7 managers: since beginning of the year circa 300,000 lots have been traded with most Derivatives on DR: of volume executed on the central limit order book. Increasing choice LSEDM volume to the end of September was up 79% with a particularly strong performance of IOB products where we continue to expand our product range with and opportunities the listing in the central order book of options on Phosagro PJSC and PJSC with options on Magnitogorsk Iron & Steel Works. We also continue our tradition of partnering with Samsung Electronics our clients in the launch of new instruments with the listing of options in Samsung Electronics DR in the central order book. Samsung is one of the most liquid DR in the IOB cash market and leading liquidity provider Susquehanna International are official market makers on the options of the South Korean giant offering investors the page 10 possibility to trade derivatives on the stock for the first time outside local market hours. Statistics Once again, thanks for your trust, interest and investments in LSEG Derivatives Markets. Events and initiatives Yours, Contacts Nicolas Bertrand Global Head of Derivatives and Commodities London Stock Exchange Group Derivatives Newsletter TOL Expo 2018: Borsa Italiana meets the online trading community IDEM Private investors represent a core segment Business for Borsa Italiana markets. Italian online trading Development community is indeed one of the most active Team in Europe, trading significant volumes on our markets. Being a financial institution, Borsa Italiana pays particular attention to these clients, developing and promoting several educational activities, also in cooperation with Online Brokers. Since 2003, Borsa Italiana organizes the Trading Online Expo, which is now one of the leading European conferences for private investors. The fair hosts market players, mainly online brokers, banks and issuers, with their booths, and includes more than 100 panels and workshops, held by experts in the field: from intermediaries to journalists, consultants, financial associations, researchers, financial advisors, analysts. Every year TOL Expo renews itself, focusing on interested the industry such as Blockchain, or the a particular topic in line with the ever-changing development of new financial technologies within financial, regulatory, technological environment traditional business models. and with the evolution of customers’ needs. 2018 has been a turning point in the financial These patterns are deeply impacting private sector, for both professional clients and private investors: we can clearly see a shift of interest traders: Mifid II has impacted the way to trade from some products to others or changes in their and approach the market while new trends have trading methods. 02 London Stock Exchange Group Derivatives Newsletter The most significant Every year educational moments within TOL Expo renews the conference include: itself, focusing Sessions dedicated to Borsa Italiana Markets on a particular (MTA, IDEM, ETFPlus, SeDeX) topic in line with Analyses of risk management activities carried out by CC&G and of index management the ever-changing activities executed by FTSE Russell financial, regulatory, Panel discussions on the importance technological of financial education and literacy, with the involvement of Consob, Banca d’Italia, Foundation for Financial environment and Education and Savings with the evolution The 1st day opening conference, with the of customers’ needs. participation of Online Brokers representatives giving their view on the industry and sharing 2018 edition their initiatives aimed at developing the sector The 2018 edition will be held at Palazzo Mezzanotte, Borsa Italiana headquarter, on Oct 24th and 25th. the speech of Alpesh Patel, special guest Participation is free; registration is necessary of this edition, who will assess global trends on the event website: in the online trading industry http://tolexpo.borsaitaliana.it/trading-online-expo-2018/ 03 TOL Expo 2018: Borsa Italiana meets the online trading community Piazza Affari’s Mid Caps Carlo Aloisio In the last few years, Piazza Affari’s investors brought Senior Broker their attention mainly on Mid Caps, attracting a considerable Unicredit interest by, among others, international investors. Worldwide, the sector of medium capitalization has developed considerably in the United States, where it is considered the real engine of the economy; the Mid Caps are those companies with capitalization that varies, depending on the several Wall Street’s reference stock indexes (such as Russell Mid Cap index, S&P 400, MSCI), from a minimum of between 200 million and 2 billion dollars, to a maximum of 5 and 10 billion dollars. In Piazza Affari, the benchmark index is the Ftse willing to accept greater price volatility. Italia Mid Cap Index, which differently form the US As far as Italy is concerned, it goes without saying does not have a minimum capitalization, but that medium-capitalization companies trust the simply includes the greatest 60 companies, given Italian industrial and manufacturing sector (but not some liquidity prerequisites, not considering those only), believing in the attractiveness of the “made that make up the Ftse Mib. The review of the basket in Italy” also by international investors. Among the is on a quarterly basis, in which the companies that most significant and important Italian Mid Caps, we are part of it can move to the main index if their can recognize brands such as Amplifon, Brunello capitalization increase, as well as exit the Ftse Mid Cucinelli, De’ Longhi, Parmalat, Tod’s, Technogym, Cap to leave room for some other title with better but also companies such as Erg, Hera and Acea. performances. Some of these firms have successfully participated in some competitions, even with the sponsorship of In recent years Mid Caps have gone through a the Italian Stock Exchange, for their ability to period that has experienced growing investment attract private savings. inflows due to a number of reasons, among which As aforementioned, Mid Caps are characterized, the most important may be that one of diversifying even if with a lower magnitude than Small Caps, risk. In fact, while the Small Cap securities offer the by a significant volatility. In fact, in the last 12 greatest growth potential, due to their high months (August 2017 to August 2018, Bloomberg volatility, on the other hand the Large Cap source) the percentage change of the value of the securities guarantee higher stability, but stocks ranges from Amplifon, which experiences an significantly lower returns. In the middle of the two, increase by more than 60%, and Brunello Cucinelli, Mid Cap securities represent an hybrid, offering the over + 61%, to the collapses of Credito Valtellinese, possibility of investing in a financial instrument with -84%, and Astaldi, -67%, with an average of with potentially attracting returns, but at the same the 60 Italian companies equal to around -5%. time limiting implicit risks. For investors, in the medium and long run, it may therefore become Another remarkable figure, when mid-cap companies reasonable to invest in small and medium-sized are taken into consideration, concerns the payment companies given that they diversify and they are of dividends. In Italy, over 85% of the companies 04 London Stock Exchange Group Derivatives Newsletter Name CHG PCT 1YR Brunello Cucinelli 61.69% that make up the Ftse Italia Mid Cap Index paid Amplifon 60.83% regular dividends in the last year. However, the ERG 40.83% payout ratio, i.e. the percentage of earnings Fincantieri 37.36% distributed to shareholders as dividends and, as a Diasorin 31.58% consequence, that one reinvested in the company, Technogym 31.86% Inwit 25.79% vary widely from one security to another. In most Juventus FC 25.56% cases, the dividend payout remains significant, with Vittoria Ass 23.69% peaks that exceed even 100%, as those firms seek to Reply 21.23% identify and collect new investors. A great advantage to the sector came in 2017 thanks to the introduction of the so-called Pir, namely individual development plans, allowing private individuals to invest up to 150 thousand euros with limits of 30 thousand per title, giving tax advantages if the securities were to be kept in a time frame of 5 years. The wave of Pir has been ridden by many financial instruments such as ETFs and Funds with the characteristic of being “marked Pir”, having injected renewed liquidity into the sector. Below, there is an example of a chart (Bloomberg source) of an ETF on the Mid Caps, where it is possible to note the strong expansion phase that began at the end of 2016 (when the Pir legislation was approved). Among the stocks that performed the most since the introduction of the new legislation, Juventus, ASTM, Fincantieri, Technogym and Biesse are to be found.