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Intercontinental Exchange, Inc. (NYSE:ICE) has made a significant move in the financial markets by announcing the launch of MSCI MarketAxess Tradable Corporate Bond Index futures. This development is set to have a profound impact on institutional investors and the overall corporate bond market.

Expanding Market Reach and Investor Demand

ICE's markets already account for over 70% of global MSCI futures trading in equity markets. With the introduction of these corporate bond futures, the company is expanding its reach and catering to the growing demand from institutional investors. The launch reflects the need for products that enable better management of corporate bond portfolios.As Caterina Caramaschi, Vice President of Financial Derivatives at ICE, stated, "We are pleased to expand our relationship to the corporate bond futures market. This reflects the growing investor demand for such products."George Harrington from MSCI added, "We are excited to be working with ICE and MarketAxess to provide investors with innovative tools. By leveraging our index methodologies and MarketAxess' liquidity metrics, clients can efficiently trade and achieve enhanced liquidity."

Methodology and Index Creation

The futures contracts are based on MSCI and MarketAxess' newly created corporate bond indices. These tradable indices aim to provide a benchmark for the performance of the corporate bond market. The MSCI MarketAxess Tradable Corporate bond indices methodology uses MarketAxess' Relative Liquidity Scores to identify and measure the performance of a selection of liquid fixed income securities from MSCI's broader Corporate Bond Indices.This ensures low tracking error to the MSCI parent indices and reliable replication of the credit market. It provides investors with a reliable tool for assessing the performance of the corporate bond market.

Adding to Existing Futures Suite

ICE's MSCI MarketAxess Tradable Corporate Bond Index Futures will join ICE's existing suite of liquid futures based on various indices. This provides participants around the world with a comprehensive set of tools to manage equity risk.So far in 2024, the average daily volume for ICE's MSCI complex is over 190,000 contracts, equivalent to an estimated $13.6 billion of notional value. Approximately 45 million ICE MSCI futures contracts have traded year-to-date.This shows the significant trading activity and the importance of these futures contracts in the market.

Benefits for Institutional Investors

For institutional investors, these futures contracts offer a way to integrate corporate bond hedges into their investment process. They provide a means to manage risk and enhance portfolio performance.Kat Sweeney, Global Head of Data and ETF Solutions at MarketAxess, emphasized the importance of credit futures. "Credit futures are an important tool for a healthy market and our institutional clients. They will generate more liquidity in the cash markets."The launch of these futures contracts is a significant step forward in the development of the corporate bond market and provides valuable tools for institutional investors.