Italy is the third-largest economy in the European Union and the eighth-largest in the world by nominal GDP. The Italian capital market has contributed a lot towards the growth of the country’s economy. Italy is home to some of the world’s largest institutional investors, but recent trends have shown a sharp surge in retail investors’ participation in secondary markets.

Borsa Italiana, the country’s leading stock exchange saw significant growth in retail trading last year. Founded in 1808, Borsa Italiana is based in Milan. In 2020, the London Stock Exchange Group agreed to sell Borsa Italiana to Euronext in a deal worth nearly $5 billion in cash, which is still subject to a number of regulatory approvals.

Finance Magnates spoke to Massimo Giorgini, Head of Equity and Derivatives Markets Business Development at Borsa Italiana, to get his views about the recent trends in Italian financial markets, including the surge in retail trading, the impact of extended trading hours for equity derivatives and the launch of the micro FTSE MIB index micro-futures on the IDEM market.

“Italy is by far the most retail-driven market in Europe, as most of the European markets are not featured by a similar contribution to volumes by private investors. Last year, was an exceptional one for us due to significant growth. When you take a look at the Italian equity markets in 2020, the main market increased 40% in trades, which is a remarkable growth in the European space, but if we dig deeper into the details we see that retail volume growth performed better than the average market, also on mid and small-cap equities” Giorgini said.

When asked about the trading style of retail traders, Giorgini mentioned: “We experienced very sophisticated retail trading strategies, with private investors actively and significantly contributing to the price discovery process also during the most volatile days. Trading that we observe from retail traders is conscious and disciplined, the result of years of educational activities promoted by Borsa Italiana and the retail trading industry.

Impact of Extended Futures Trading Hours on the IDEM Market

“Last year, in mid-February we decided to extend trading hours for the Italian Derivatives Market due to growing customer demand. Now the market is opening up at 8 am CET and closing at 10 pm CET, basically following the closing time of the American markets. This has been a very important development as we have a large number of clients from the US as they want to trade FTSE MIB Index Futures directionally or against other financial instruments. Across FTSE MIB Index Futures and FTSE MIB mini Futures, we traded more than 700,000 contracts only in the extended trading hours last year, between 8 am CET and 9 am CET and between 6 pm CET and 10 pm CET. The most important thing is that on some occasions, we had days where 25% of the futures volume was traded during the extended hours. Retail traders are staying in the market till the US market closes in the evening,” Giorgini added.

Introduction of the FTSE MIB Index Micro-Futures

Borsa Italiana launched the micro FTSE MIB Futures (microFIB) on 19 October 2020 to address the needs of the retail community. Finance Magnates asked Giorgini about the newly launched contract.

“In 2020, we decided to launch the first micro index futures in Europe. So now we offer the main futures contract, a mini futures contract (20% value of the main futures contract), micro futures contract (20% value of the mini futures contract). The FTSE MIB micro futures has a contract value of 4,000 euros, meaning that retail investors can enter into a micro futures position with only 600 euros. With this initiative, we have addressed the growing demand from retail investors. In addition to that, CFD trading products are facing growing scrutiny from the European regulators, thus we have seen an opportunity to enter the market providing exposure to the Italian market with a clear and compelling market proposition, as the product is listed and guaranteed by the Italian clearing house (CC&G), while CFDs are not. Last but not least, liquidity is provided by 4 leading electronic market makers. Since the launch in late October, we have traded more than 70,000 contracts, and we were able to hit a new volume record in January. We are receiving a lot of support from the retail trading industry, and we are very pleased with the results as well,” Giorgini mentioned.

Going Forward in 2021

“In January 2021, the success has continued across the board in the retail and institutional trading, in January this year, the equity markets trades were up 22% compared to January 2020 which was already an exceptional month. We are committed to providing a reliable market infrastructure to participants, and we are always working on new initiatives in partnership with member firms and industry stakeholders,” Giorgini added.