Optiver Starts Market Making Autocallable ETFs

Optiver began market making WisdomTree’s autocallable ETFs on Sept. 30, providing continuous two-way prices on Xetra and Borsa Italiana. The products are listed through WisdomTree’s Irish UCITS platform and reference the EURO STOXX 50 over six years.

The initial range has two strategies. The standard Autocallable ETF has an annual autocall barrier of 100% and a protection barrier of 70%. The Defensive Autocallable ETF has declining annual autocall barriers of 100%, 95%, 90%, 85%, 80% and 75%, with a protection barrier of 65%. Both products have a snowballing coupon.

Four ISINs for each strategy are listed on each exchange. WisdomTree expects the range to grow to about 20 ISINs within 12 months. The listings are the first autocallable ETFs for which Optiver has provided on-screen market making.

An autocallable ETF packages a payoff commonly used in structured notes within an exchange-traded fund. Investors can trade the ETF during the day, while the fund publishes a daily net asset value and its holdings. The ETF gains its exposure through a collateralised swap within the UCITS structure rather than through the credit exposure of a single issuing bank.

Within a week of launch, the fund holds a ladder of 12 to 16 autocallables, with the portfolio expected to grow to about 50. The instruments have staggered strike dates, while a traditional note generally provides exposure to one strike date and remains a single issuance until maturity.

Investors can trade the ETFs on screen, request quotes at risk or at net asset value, and use execution strategies linked to different benchmarks. These include immediate execution at the best bid or offer, opening and closing auction strategies, and volume-weighted average price execution over a selected period.

“Autocallable ETFs are an interesting evolution of a well-established product,” Jean-Marie Tine, Optiver’s head of Delta-One institutional sales, wrote. “The ETF wrapper gives investors another way to access the exposure, while market makers like Optiver can help make that access more liquid and efficient.”

Michael Delew, WisdomTree’s head of capital markets for Europe, described continuous on-screen liquidity as a requirement for offering the products through the firm’s UCITS range. Optiver will provide continuous two-way pricing and support the expansion of the ETF range, WisdomTree said.