Nasdaq announced the launch of Nasdaq Custom Basket Forwards. The Custom Basket Forwards solution meets the increasing market demand for a simpler and more efficient way of handling equity exposures by utilizing standardized contracts on the regulated market.
Custom Basket Forwards enable investors to create a Forward contract on a customized equity basket that is defined by return type, currency, and selected from a European universe of equities, totaling around 1,700+ stocks from 15 countries. The customized equity basket is calculated in accordance with a standardized calculation methodology where corporate actions are monitored and adjusted for, in line with conventional standards. The customized equity basket is in scope of the European Benchmark Regulation, BMR, and is governed by Nasdaq registered Benchmark Administrator.
Following the definition of the basket, a cash settled Forward contract is issued in Nasdaq’s trading and clearing systems where the customized basket serves as the underlying instrument. Trade reporting takes place during regular trading hours, investment banks provide the security of liquidity provision, and Nasdaq Clearing acts as counterparty in the transactions.
“I am really thrilled about the introduction of a very strong alternative to OTC-derivatives such as equity swaps,” said Nikos Georgelis, Portfolio Manager, Atlant Fonder. “Through the launch of Nasdaq Custom Basket Forwards, we are now offered a great instrument that provides us with a simple, flexible, and cost-efficient way to gain tailored exposures via a standardized derivate contract that is centrally cleared and traded on a regulated market.”
Custom Basket Forwards allow clients to combine some of the bespoke elements of OTC-derivatives, such as equity swaps, with the benefits of a standardized contract traded on a regulated market and with central counterparty clearing.
“We are very excited to offer our Nasdaq Custom Basket Forwards solution to our clients and we are very pleased about the strong demand for our product,” said Alessandro Romani, VP, Head of European Derivatives at Nasdaq. “Bilateral risk, bilateral dependency in liquidity provision, and costs associated with regulation have all been contributing factors to the vast market demand for a simpler and more cost-efficient way to manage tailored equity exposures. With the introduction of Custom Baskets Forwards more clients are given access to a simple and efficient solution for ESG and climate investments, thematic investing, ETF replications, investing in tailor-made indexes, and equity financing.”
Information on Custom Basket Forwards can be found at Nasdaq Custom Basket Forwards.
Source: Nasdaq
