EAFE Futures to Launch At Long Last

December 09, 2005

The CME announced the forthcoming launch of MSCI EAFE futures in Q1, 2006.

After years of anticipation, MSCI EAFE futures will finally be making it to market.  The Chicago Mercantile Exchange (CME) announced plans to launch a futures contract based on the erstwhile European/Asian-based index.  This contract is designed specifically to help investors engage in a variety of trading and portfolio management strategies in developed international equity markets.  The new CME E-mini MSCI EAFE futures contract are scheduled for launch on March 21, 2006.

Created in 1969, the MSCI EAFE Index is widely recognized as the preeminent benchmark for measuring international stock market performance.  It comprises 21 MSCI country indices, representing the developed markets outside of North America.  Approximately $1.5 trillion is benchmarked to the EAFE Index globally.  Additionally, the EAFE Index is the basis for the second largest exchange traded fund in the world. 

"CME continues to expand its global reach and attract new customers with innovative products, targeted incentive plans and a network of telecommunications hubs around the world," said CME Chairman Terry Duffy.  "The CME E-mini MSCI EAFE futures contract expands our growing international equity index product line.  With the MSCI EAFE Index and some of the most widely recognized non-U.S. equity indexes, as well as all major U.S. indexes, CME now offers the tools to manage risk across nearly every major equity market in the world."

"We are delighted to have licensed our MSCI EAFE Index to CME as the basis of a futures contract," said Rabbe Ekholm, Managing Director of MSCI Barra.  "A futures contract will further compliment the EAFE Index as the premier international benchmark."

"We are pleased to partner with MSCI Barra to offer this significant new hedging tool that will bring tremendous risk management benefits to global equity markets and solidify our position as the world's leading marketplace for equity derivatives trading," said Craig Donohue, CME Chief Executive Officer.  "In addition to CME's broad offering of liquid large, medium and small cap U.S. indexes, and our foreign stock index products, our customers will now have a cost-effective way to replicate the MSCI EAFE Index as part of their overall portfolio management strategy."

The MSCI EAFE Index Country Weights as of October 31, 2005

 

Country

Weight

Country

Weight

Country

Weight


UK

25.1%


Italy

3.7%


Denmark

0.8%


Japan

24.1%


Netherlands

3.3%


Ireland

0.8%


France

9.4%


Sweden

2.3%


Norway

0.8%


Switzerland

7.0%


Hong Kong

1.7%


Greece

0.6%


Germany

6.9%


Finland

1.4%


Austria

0.4%


Australia

5.3%


Belgium

1.3%


Portugal

0.3%


Spain

3.9%


Singapore

0.8%


New Zealand

0.2%

 

 

There has long been a call for EAFE futures, but it is thought that MSCI had reservations about potential problems with the products, and the possibility that sufficient liquidity might not occur for the product to be successful. 

The wild success of the iShares EAFE fund (EFA) underscored the point that there is tremendous demand in the institutional space for lower-cost efficiently-trading liquid exposure to the EAFE index, which is difficult to replicate accurately and at low cost because of the wide variance of markets, international tax issues and trading logistics involved.  It is felt that the futures, should they be successful could not only bring increased liquidity to EAFE index trading, but also more accurate market pricing when markets in the EAFE exchange are closed for trading.

 

Find your next ETF

Reset All