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Nasdaq has launched its Custom Basket Forwards solution, aimed at addressing the growing demand for simplified and efficient ways of managing equity exposures. The new offering, announced on Tuesday, allows investors to create a forward contract on a customised equity basket, leveraging some elements of OTC-derivatives while enjoying the advantages of standardised contracts traded on the regulated market and central counterparty clearing.
The Custom Basket Forwards solution permits clients to define their equity baskets by return type and currency, selecting from over 1,700 stocks across 15 European countries. Once these baskets are defined, a cash-settled forward contract is issued in Nasdaq’s trading and clearing systems, with the customised baskets serving as the underlying instrument. Nasdaq Clearing acts as the counterparty in these transactions.
Julian Butterworth, Head of Sales for European Equities and Derivatives at Nasdaq European Markets, spoke to The TRADE about the increasing investor appetite for customised equity exposures that mirror stock portfolios. He noted that stringent regulation and the operational complexity of OTC products often limit their feasibility.
In response to this demand, Butterworth explained that Nasdaq’s Custom Basket Forwards have been well received by clients looking to create customised equity baskets cleared on a regulated market.
Alessandro Romani, Vice President and Head of European Derivatives at Nasdaq, echoed these sentiments. He pointed out that factors such as bilateral risk, dependency in liquidity provision, and costs associated with regulation have all contributed to the strong market demand for a simpler and more cost-efficient way to manage tailored equity exposures.
Romani added that the introduction of Custom Baskets Forwards gives more clients access to a simple and efficient solution for ESG and climate investments, thematic investing, ETF replications, investing in tailor-made indexes, and equity financing.
Nikos Georgelis, Portfolio Manager at Atlant Fonder, praised the new offering for its simplicity, flexibility, and cost-efficiency. He expressed enthusiasm about the launch of Nasdaq Custom Basket Forwards as a strong alternative to OTC-derivatives such as equity swaps. Georgelis highlighted the value of gaining tailored exposures through a standardised derivate contract that is centrally cleared and traded on a regulated market.
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