E-Mini Equity Futures Trading A Bright Spot For CME Group
May 01 2009 - 4:12PM
Dow Jones News
April brought a sizable upswing in equity index futures trading
at CME Group Inc. (CME), as the rally in stocks and lower
volatility brought traders back to the market and new participants
arrived on the scene.
Average daily volume in CME's E-mini equity futures complex
advanced 17% over April 2008 levels, according to data from the
Chicago-based exchange operator, a bright spot as activity in other
product groups remains depressed.
Trade in mini-sized electronic contracts on the S&P 500
stock index, the most heavily traded of CME's equity products, was
33% above year-ago levels.
E-mini contracts, geared primarily toward retail participants,
are one-fifth the value of standard-sized futures contracts.
Equity derivatives make up about one-fourth of CME Group's
revenues and in the first quarter of 2009 topped interest rate
futures and energy as the most profitable product group, the
exchange reported last week.
Volume in CME's interest rate futures complex, which has
historically accounted for 60% of growth, continued at about half
year-ago levels in April.
The rally that ignited stocks in mid-March has lured investors
back to equity markets, with April average daily volume at cash
equities operators NYSE Euronext (NYX) and Nasdaq OMX (NDAQ) up a
respective 30.9% and 21% year-on-year, according to estimates from
Fox-Pitt Kelton.
Meantime U.S. options trading rose 20.7% in April, with the
Chicago Board Options Exchange posting a 28% increase.
"There's nothing like a bull move to get people involved, after
the liquidation we saw in the fourth quarter," said Frank Lesh, a
futures broker with Futurepath Trading. "There's a propensity for
people to trade right now, and generate a little income."
Stocks' recent run-up, with the Dow Jones Industrial Average
almost 25% higher since March 9, prompted trend-following futures
traders to reverse a long Treasurys-short equities trade that saw
much use throughout the financial crisis, according to market
observers.
Lower volatility brought back some investors who began the year
on the sidelines, and CME has also seen newcomers as traders from
dealer banks and hedge funds find new homes or start up their own
shops, according to Scot Warren, CME's managing director of equity
products.
While the overall number of participants trading equity
derivatives is about the same, Warren said traders' fragmentation
brings competing views that add depth to the market.
Warren said CME's array of equity index futures, covering the
S&P 500, the Dow Jones Industrial Average and others, has been
an advantage as more investors play one benchmark against another,
sometimes to express a view on a particular sector.
If this type of customer interest holds, CME may eventually
develop sector-specific products, Warren said.
-By Jacob Bunge, Dow Jones Newswires; (312) 750 4117;
jacob.bunge@dowjones.com;
and Howard Packowitz, Dow Jones Newswires; 312-750-4132;
howard.packowitz@dowjones.com