Here’s why CME Group’s Micro E-mini Futures are going to be the future for futures trading

1 August 2019

CME Group, the original creators of the E-mini S&P 500 index futures contract, made waves in May when it launched its Micro E-mini futures contracts. The new bite-sized contracts were made available for the S&P 500, Nasdaq-100, Russell 2000 and Dow Jones Industrial Average.

Micro E-mini futures are a tenth the size of CME Group’s existing and highly traded E-mini equity index futures. That means, where an E-mini S&P 500 futures contract has a multiplier of US$50, its Micro E-mini contract would have a multiplier of US$5, as shown in the table below.


Index FamilyMicro E-mini MultiplierE-mini Multiplier
S&P 500$5$50
Dow Jones$0.50$5
Russell 2000$5$50

Source: CME Group

Here’s why they are going to be the future in futures trading.


It meets the needs of growing numbers of retail traders

CME Group noted that trading patterns had shifted dramatically in recent years, with growing numbers of retail traders. Based on 2018’s figures, its non-institutional trading volume had grown 27% compared to the previous year, with active traders averaging 660,000 contracts each day. On a global scale, active trader participation on CME Group markets rose by 30% in Asia and by 36% in Europe during the same period.

CME Group’s newly launched Micro E-mini futures contracts, taps directly into that growing segment. E-mini contracts have been the futures contracts of choice among institutional and professional traders and Micro E-mini contracts now provides a similar option for individual retail traders.

The bite sized contracts trade just like their E-mini counterparts, making it easier for retail traders to add exposure to the various indices in their portfolio, without needing the risk appetite and large trading accounts of institutional investors.

Within the first month of its launch, over 11.25 million contracts were traded globally, making the Micro E-mini futures contracts CME Group’s most successful product launch to date.


They are available on the most liquid, most actively traded equity index futures

CME Group made the deliberate decision to launch the micro E-mini futures contracts in four of the most liquid and most actively traded equity indices: S&P 500, Nasdaq-100, Russell 2000 and Dow Jones Industrial Average.

The S&P 500 index provides exposure to U.S. large-cap stocks, while the Nasdaq-100 offers exposure to the largest non-financial companies in the Nasdaq stock market. The Russell 2000 index is the leading small cap benchmark, providing excess to 2,000 U.S. small-cap stocks, and the Dow provides trade exposure to 30 U.S. blue-chip companies.

As such, retail traders are now able to trade in these popular indices through the Micro e-mini futures contracts, even as the underlying indices continues to run and make E-mini equity index contracts prohibitively expensive for individual retail traders.

To illustrate this point, take a look at the S&P 500 index price chart. The index rose from about 1000 points in 1997 when the E-mini S&P 500 futures contract was first launched, to the current 3000 points. The notional value of the E-mini S&P 500 futures contract had also risen from about US$47,000 at its launch, to over US$140,000 today.

Source: CME Group

Micro E-mini contracts for S&P 500, in contrast, have a notional value of about US$14,000 at current prices. Based on the chart below, traders need only put up an initial margin of between US$390 to US$840, relative to current index prices, to start trading.

Index FamilyPriceNotional Value (USD)Initial Margin (USD)
Micro E-mini S&P 5002889.2514,446.25693.00
Micro E-mini Nasdaq-1007515.5015,031.00836.00
Micro E-mini Dow Jones2608613,043.00605.00
Micro E-mini Russell 2001522.607,613.00390.50

Source: Phillip Futures


Micro E-mini futures complement E-mini futures, not replace them

The beauty of the new Micro E-mini futures contract, is that it aims to complement the existing E-mini futures contracts. The Micro E-mini futures contracts function and trade just like the E-mini contracts, so traders can continue to use their own favourite trading and risk management strategies, managing positions with greater precision.

Both futures contracts types are interchangeable, so with the 10:1 contract ratio, existing traders holding E-mini futures contracts can easily convert them to a Micro E-mini futures position, and vice versa.

The smaller contract sizes available for trading also means traders can get a greater access to liquidity wherever needed.


Micro e-mini futures could revolutionise the futures market, just as E-minis did

CME Group is one of the leading and most diverse derivatives market place globally, and its exchanges offer the widest range of global benchmark products across all major asset classes, including interest rates, equity indexes, foreign exchange, energy, agricultural products and metals.

When CME Group first announced the E-mini futures contract for the S&P 500 in 1997, it came at a time when futures trading was the dominated by professional and institutional traders, and the S&P500 futures contract had become too capital intensive for retail traders.

The E-mini S&P 500 futures contract was the first of its kind, and was launched at a fifth the size of the full-sized contract. The smaller sized E-mini contracts quickly gained popularity and spawned a whole generation of similar e-mini contracts at CME Group and mini contracts at other exchanges for other commodities, indices, and asset classes.

Even today, the E-mini S&P 500 remains one of the most actively traded e-mini futures contracts, after having taken over its predecessor in trading volumes in 2009.

With the gap that Micro E-mini futures fills, and the growing competition to increase liquidity in the futures market, these new Micro E-minis look set to repeat the precedent set by its E-mini older brother.

If you are interested to trade CME Micro E-mini futures, you can find out more from Phillip Futures, and sign up for one of their free seminars on CME Micro E-mini futures now.