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Nasdaq Introduces Futures Tied to Swedish Small-Cap Index

Report: Systematic Strategies

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Stockholm (HedgeNordic) – Nasdaq has rolled out futures linked to the OMX Sweden Small Cap 30 ESG Responsible Index. This index, and by extension, the futures offering, is based on the 30 most liquid small-cap securities listed on Nasdaq Stockholm, whose issuers meet specific ESG criteria. Considering that smaller-sized listed companies in Sweden, as in other parts of the world, often exhibit lower liquidity in their shares, these futures offer a multitude of applications for asset managers, retail investors, and exchange-traded product issuers.

“The main driver behind launching this new futures solution stems from the presence of over SEK 300 billion in assets under management overseen by equity funds in Sweden, focusing on the Swedish small-cap market segment,” notes Alessandro Romani, Vice President and Head of European Derivatives at Nasdaq. While various market participants may use futures on the Swedish small-cap segment for different purposes, Romani underscores that the futures “primarily serve cash management purposes, enabling efficient exposure to the Swedish small-cap market.” According to Romani, this new futures solution caters to fund managers, asset managers, retail investors, and exchange-traded product (ETP) issuers alike.

“The main driver behind launching this new futures solution stems from the presence of over SEK 300 billion in assets under management overseen by equity funds in Sweden, focusing on the Swedish small-cap market segment.”

lessandro Romani, Vice President and Head of European Derivatives at Nasdaq

The futures tied to the small-cap segment in Sweden can play multiple roles, including facilitating cash management and hedging, and supporting the creation and trading of ETPs and structured products. Traditional long-only equity funds, at times compelled to hold a portion of their assets under management in cash to accommodate investor outflows, can counteract the cash drag on performance by utilizing these futures, designed to offer high liquidity and low transaction costs. Fund managers may also rely on the futures to “quickly ramp up exposure” exposure to what is perceived as a less liquid universe of stocks, as highlighted by Romani. Long/short equity managers specializing in this area can employ the futures to manage portfolio risk and efficiently adjust net market exposure, while trend-following CTAs can employ the futures to capture market trends.

“This is an excellent product that can be used in our long-only equity funds, as well as for hedging purposes in our absolute return funds,” says Marcus Plyhr, Portfolio Manager at fund boutique Norron Asset Management. “With this innovative setup and great liquidity, we will be able to hedge our funds in a better way than through any other relevant product existing on the market,” adds the fund manager at Norron, which features two absolute return funds and two long-only equity funds among its product range.

“This is an excellent product that can be used in our long-only equity funds, as well as for hedging purposes in our absolute return funds.”

Marcus Plyhr, Portfolio Manager at Norron Asset Management

While the commercial launch of the futures solution takes place on April 10, Romani highlights that the solution has undergone extensive back-testing and live implementation over the past ten days in collaboration with all involved parties, including market-makers and other providers. The futures solution on the OMX Sweden Small Cap 30 ESG Responsible Index also reflects the strong local demand for ESG-conscious and aligned products, as emphasized by Romani. “We are very pleased to meet the strong market demand for an index future covering the Swedish small-cap segment,” concludes Alessandro Romani. “The new index future offering is part of Nasdaq Europe’s strategy to support investors with a liquid and diversified product for the Nordic region combined with our and the region’s strong commitment to ESG.”

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Eugeniu Guzun
Eugeniu Guzun
Eugeniu Guzun serves as a data analyst responsible for maintaining and gatekeeping the Nordic Hedge Index, and as a journalist covering the Nordic hedge fund industry for HedgeNordic. Eugeniu completed his Master’s degree at the Stockholm School of Economics in 2018. Write to Eugeniu Guzun at eugene@hedgenordic.com

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