European Equities: The great equity rebalancing act
To many participants in the European equity markets, the recent fuss about which index will eventually become the benchmark for investors in the eurozone is as baffling as it is frustrating. "To me it's simple," says Mark Harvey, director at Credit Suisse Financial Products. "An index is either broad or narrow. It either covers just the eurozone, or it adds in the Emu-out countries like the UK. And those are about the only differences that matter. One of these indices will become widely accepted. I don't much care which."
To an equity derivatives trader, progress seems painfully slow. There are now traded derivatives on three pan-European benchmarks: the FTSE Eurotop 100 and the narrower Stoxx 50 and Euro Stoxx 50 benchmarks compiled by Dow Jones. None has yet come even close to supplanting existing national stock indices, such as the DAX and the CAC 40, as the vehicle of choice for European stock futures trading. "I had thought when FTSE took over Eurotop, more liquidity would develop in traded futures and options. But that hasn't happened," says Harvey. Unkind traders still refer to Eurotop as Euroflop.