Italian Derivatives Market (IDEM): What It Is, How It Works

What Is the Italian Derivatives Market?

The Italian Derivatives Market (IDEM) is a derivatives exchange headquartered in Milan, Italy. The IDEM is part of the Borsa Italiana, the Italian Stock Exchange, which is owned by the London Stock Exchange. The IDEM allows trades of futures contracts on indices, equities, and commodities such as electricity, as well as mini contracts. Like many derivatives exchanges across the world, the IDEM has seen a steady increase in volume over the past years from both domestic and foreign investors.

Understanding the Italian Derivatives Market (IDEM)

The Borsa Italiana exchange dates back to the early 1800s when it was created to replace the former Borsa di Comercio. The Italian Derivatives Market (IDEM) was launched in 1994 by the Italian government. In 1997 the IDEM, along with the Italian Stock Exchange board, was privatized by the Italian government. The government-controlled Stock Exchange Board handed control of IDEM and the Italian Stock Exchange over to the Borsa Italiana, which is held privately by the London Stock Exchange Group (LSE). The Borsa Italiana is responsible for the management of the IDEM and the Italian Stock Exchange.

The Italian Derivatives Market (IDEM) is cleared by the Cassa di Compensazione e Garanzia (CC&G), which is also part of the London Stock Exchange Group. The IDEM trades approximately 200,000 contracts daily, which places it in the top European derivatives exchanges by volume. The IDEM trades derivatives, specifically options and futures.

Italian Derivatives Market Procedures

The Italian Derivatives Market (IDEM) operates Monday through Friday, 8 a.m. to 8 p.m. CET, with pre-market sessions from 7:45 a.m. to 8 a.m. and post-market sessions from 5:50 p.m. to 10 p.m. The unit of trade in the IDEM is the euro. More than 80 members from European countries are directly connected to the IDEM, and more than 20 market-making firms are active on the IDEM.

The Italian Derivatives Market (IDEM) trades derivatives primarily of the Financial Times Stock Exchange (FTSE) Milano Indice di Borsa (MIB) index. The FTSE MIB Index is the primary benchmark index for the Italian equity market, which accounts for approximately 80% of Italian domestic market capitalization and follows 40 Italian equities. 

Products traded on the IDEM include the FTSE MIB Index futures, FTSE MIB Index mini-futures, FTSE MIB Dividend Index futures, FTSE MIB Index options, FTSE MIB Index weekly options, Italian and Pan-European single stock futures, and Italian single stock options.

There are two segments in the IDEM. IDEM Equity lists both index and single-name futures and options and trades Italian and Pan-European derivatives. IDEX lists Italian power futures and trades derivatives of commodities and related index derivatives.