ETF options are already amongst the most heavily traded options in the USA, and Eurex says it is anticipating massive demand for the new products from the European hedge fund community as well as from traditional fund managers looking for innovative risk management tools.

Eurex CEO Rudolf Ferscha says that futures and options on ETFs offer custom-made hedging opportunities for the underlying exchange-traded funds: "Derivatives products on ETF have a high benefit for the customer and they are an ideal complement to our existing index derivatives segment."

According to a report released in August by Merrill Lynch, retail and institutional investors alike are gravitating to exchange-traded funds, not least because of the opportunities they offer for effective shorting of an index or sector. Merrill listed 246 ETFs worldwide with nearly $130bn under management, up from less than $50bn at the start of 2000.

"This is the only section of the equity market that has shown growth over the past year with the background of declining equity markets," said Michael Maras, head of global equity-linked research at Merrill. "The growth you see is not inflated by rising index levels. It is genuine client interest."

Among the European exchanges to offer ETFs is Virt-x plc, which unveiled a new market segment for them in May. The market initially supports trading in 23 ETFs, including iShares funds.

Deutsche Borse, a shareholder in Eurex, became the first European exchange to offer exchange-traded funds, which are mostly traded through Xetra as XTFs. There are currently 57 index funds and 14 actively managed equity funds listed in the XTF sector.