CME Group stock index products

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CME Group offers trading in futures and options products on key benchmark equity indexes. These include small, medium and large-cap indexes representing baskets of equities in the U.S., Europe and Asia: on Standard & Poor's, Dow Jones, NASDAQ, Nikkei, MSCI EAFE and FTSE/Xinhua indexes, and others, including a long list of highly successful, smaller E-mini equity indexes. Many of CME Group's index products are traded electronically virtually 24 hours each business day.

Trading Day

In 2012 it was announced that CME Group would switch from quarterly price limits to daily price limits on Feb. 4, 2013. Quarterly price limits would continue to be used, but with a modification to methodology: Effective November 18, the reference price used in the price limit calculations would change from the 3:15 p.m. futures settlement price to a volume‐weighted average price (VWAP) determined between 2:59:30 p.m. CT and 3 p.m. CT.[1]


CME Group Equity Index Products

Full-Sized Products[2]


E-Mini Products[2]

CME previously offered E-mini Russell 2000 and 1000 futures contracts, but in June 2007, CME lost its exclusive licensing agreement for Russell index futures products to the Intercontinental Exchange. CME group delisted E-mini Russell 1000 and E-mini Russell 2000 futures and options from Globex in 2007 and 2008 respectively. CME Group introduced S&P SmallCap 600 futures as a benchmark to replace the E-mini Russell 2000 index and established an intercommodity spread between E-mini S&P SmallCap 600 futures and E-mini Russell 2000 futures to aid market users wishing to transfer their small-cap exposures to E-mini S&P SmallCap 600 futures.[3]

In August 2015 CME Group entered into a licensing agreement with London Stock Exchange Group to list derivatives contracts based on Russell indexes that are currently listed only on CME's rival Intercontinental Exchange. The agreement is for 12 years and includes futures, options on futures and cleared over-the-counter products based on FTSE and Russell indexes. The deal gives CME exclusive listing rights for contracts on FTSE Russell indexes once ICE's agreement with Russell expires in mid-2017.[4]

History

Chicago Mercantile Exchange introduced stock index futures in 1982 with the launch of the Standard & Poor's 500 stock index futures contract, adding others along the way, including various Nasdaq and Russell indexes, and in recent years, indexes based on key benchmarks representing equity groupings in a number of international regions and countries.

In 1997 CME introduced the E-mini S&P 500 futures contract ("E" indicating that it would be traded electronically; "mini" specifying a contract multiplier one-fifth the size of the larger S&P contract). The E-mini S&P contract was CME's answer to then-crosstown rival Chicago Board of Trade's DJIA futures contract, which was to be traded solely by open outcry. The two exchanges had bid for the right to license the DJIA index from Dow Jones, with the Chicago Board of Trade winning that right. While no one was privy to the precise reason for Dow Jones' choice, some wondered whether rather than creating an entire capabilities study and marketing brief for Dow Jones, it might not have been more effective to leave blank document pages and simply print a dollar amount bid to Dow Jones on the document's front cover.

The S&P 500 futures contract was king of the hill for many years at CME and still is a maintstay for portfolio managers who benchmark their performance against the index. However, traders warmed quickly to the smaller size of the E-mini contract, and in relatively short order it eclipsed volume in the CBOT's DJIA futures. In addition, electronic trading was just beginning to take hold, and the CBOT stuck to pit trading of their Dow index until the decision was made to downsize their index and take it electronic as well, but not before CME had captured the market with the E-mini S&P contract. As stock prices rose late in the 1990s and early in 2000, the E-mini S&P contract became increasingly popular and today is the most-traded equity index product in the world, as well as one of the most active of all futures currently traded.

With the merger of CME and the Chicago Board of Trade in July 2007, CME Group finally gained access to the Dow, which had eluded them ten years earlier. This meant the addition of three price-weighted Dow equity index products: the mini-sized DJIA futures ($5 multiplier), DJIA futures ($10 multiplier), and the "Big" Dow futures contract ($25 multiplier). The mini-sized DJIA futures, which in 2006 averaged more than 100,000 contracts per day, is far and away the volume leader of the three.

Regulation and Clearing

Regulated by the Commodity Futures Trading Commission, CME Group's stock index product customers deal anonymously in a fully transparent market, where large and small customers have equal access to the same prices and same deep pool of liquidity. A central futures clearing mechanism, CME Clearing, settles all trades and acts as the counterparty between buyers and sellers, thus virtually guaranteeing the creditworthiness of every transaction.

Other CME Group Product Areas

References

  1. Notice. CME Group.
  2. 2.0 2.1 Equity Index Products. CME Group.
  3. The Russells Move to ICE. FIA.
  4. CME agrees to offer derivatives on Russell indexes. Reuters.

Resources

CME Group Web site [[1]]